I have just started working for a new employer as a full time Sales Representative and the employer is paying fortnightly a car allowance reimbursement. Car allowance of $20k annually which also includes fuel and running costs. I am not sure if I should purchase a new or used car or lease a car and which is the best option tax wise, given the car will be used for business purposes 80- 90% time? Thank you Gen.
speak with your accountant, but generally you can claim back the depreciation, interest, gst and running costs to the proportion of business use. with a new car you may find that you will have more depreciation to claim back than you would on a used one.
happy to have a chat with you if you like. i am a car finance broker and come across these scenarios all the time.
Tareq - 0410755009
I presume the payment you will get is an ällowance" as opposed to a "reimbursement" The reason for this distinction is that that an allowance is something you will pay tax on, whereas a reimbursement is not going to appear on your group certificate, and hence you wont pay tax on it.
so, on the assumption that you are being paid an allowance, and you are expected to catch and kill your own vehicle, then the FIRST thing you will need to do is get a log book and FILL IT OUT!! If you dont have a properly completed log book you can only claim a very small amount in your tax return.
Then you need to get in the habit of paying for ALL your car expenses using a debtit card so you have a good simple way to track your expenses. AND KEEP ALL YOUR RECEIPTS!!!!!! the ATO is going batshit crazy right now on people who want to claim large amounts of car expenses, and you will be one of these people.
to give you an example of the difference to your tax refund a large car claim can make, have a look at this example:
sales rep on $120k, including a $20k car allowance.
interest on finance 3000
total car exp 18950
log book % 90%
claimin tax return 17055
tax benefit 6480 (ish)
if you dont have a log book, then you are limited to 5000km @ 66c/km = 3300.
tax benefit = 1250 (ish)
SO a log book (and all the documents) will put an extra $5000 in your pocket!!!!!!
as to what to buy, the benefit of having a new car is that you get the new car warranty and smell, and maybe the finance might be a lower rate than second hand....
or you can buy (and still finance) a second hand car for a LOT less than a new car.
What I aim for is generally a good second hand car with not too many miles up on it, and drive the thing until the wheels fall off.
but that is up to you...it depends on whether you like the idea of a new car or not.
find a GOOD bean counter to help you with the log book and documentation stuff!!!
Only thing I'll add to BC above - whatever car you are buying, understand that if you buy above $57k you may be limited to the amount of depreciation you can claim. New or second hand does not matter.
And remember - LOG BOOK!!!