Tax Tips
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Tax Tip: Buying a business vehicle
‘Should I buy a vehicle through my business?’
I’m thinking of buying my next car though my business. What factors should I consider?
FACTOR ONE ‘Business use’
You need to calculate what percentage of the kilometers will be personal and what portion will be for business. If the Business use is not at least 75%, think again. The personal use will attract FBT which sues a 47% marginal tax rate. Extensive personal use can make the purchase tax-crippling.
FACTOR TWO ‘GST credit’
If the Car is used exclusively for business, the GST can be claimed in entirety. Of course, if the car is used in part for personal activity, only the business percentage can claimed for GST credit. Note that GST is also limited by the luxury car threshold, meaning, GST can only be claimed on the portion under the 57,581 threshold for 2019-2020.
FACTOR THREE ‘personal contributions to car costs’
If the worker using the vehicle for personal use contributes the personal use running costs, this will mitigate the FBT for the company.
FACTOR FOUR ‘Depreciation’
The company can claim depreciation on the vehicle for the business use percentage. NOTE – if the Vehicle is costs less than the instant asset write-off threshold, the entire asset cost can be claimed instead of depreciated.
FACTOR FIVE ‘claiming my personal car costs for business use’
If you decide not to purchase the vehicle through the company, but use your personal vehicle for business purposes, then you can claim tax credit for your usage. This is claimed in your persona tax return and can be done by log book or kilometer method.
FACTOR SIX – ‘business signage on the vehicle’
Having business signage on your vehicle makers no difference to above rules. You can, however, claim your cost of the sign-writing you put on the vehicle.
Tax Tip: Donations
How do know if my donation is tax deductible?
- For a donation to be tax deductible, it must be
- given to an organisation endorsed as a Deductible Gift Recipient (DGR). Visit the ACNC Charity Register if you are uncertain about this. However, a receipt will often have all donations of $2 or more are tax deductible, which indicates the charity has DGR status.
- a genuine gift. You cannot receive any benefit from the donation. This means that purchases from a charity that involve raffle tickets or material goods in return, cannot be claimed as tax deductible gifts.
What if I give to an overseas charity?
The Charity must be registered with the ACNC for Tax deductibility to apply. This means Overseas Charities need to have an Australian registration, or the donation cannot be claimed in your Tax Return.
Tax Tip: Deceased Estate
A family member has died leaving behind property/shares and cash.
How is tax to be done regarding this estate?
The process is as follows:
Step ONE
Does the deceased person have a will?
YES – determine the executor
NO – apply to court for letters of administration (not all estates require this)
Step TWO
Has Probate been obtained by the executor?
YES – go to Step THREE
NO – you may need to establish your right to manage the deceased’s tax affairs
Talk to the ATO about this.
Step THREE
Notify the ATO of the Person’s death (documents will be required)
Make the ATO aware of relevant parties acting on behalf of the estate
Step FOUR
Do you need to lodge a final individual tax return for deceased person?
YES – have the final tax return done by an accountant for the financial year in which they died and any previous outstanding years.
NO – have your accountant put in a ‘lodgment not required’ return.
Step FIVE
Do you need to lodge a Tax return for the Estate?
YES – go to Step SIX
No- if all the above is completed – no further action is required
Step SIX
Obtain a Tax File Number for the Estate. This is required as a deceased estate is treated as a trust for tax purposes. Go to Step SEVEN
Step SEVEN
Lodge the Deceased Estate Tax returns
Use a Trust Tax return. Special instructions for trustees of Deceased estates are in the appendices of the Instructions. This may require multiple year returns until the estate is fully administered.
Note
The ATO has developed a Deceased Estate Data Pack for executors and administrators with law pertaining to tax, income and superannuation admin for a deceased person.
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