ABN FOR VEHICLE PURCHASE
Submitted: Thursday, Mar 30, 2006 at 18:46
I am about to purchase a 4x4 and on nearly on all occasions Im asked by salesmen "do you have and ABN number, you will save x dollars"?
I dont have an ABN number, however my son is a small businessman and he has never bought a vehicle using his number, hence he suggested I use his to get the savings.
My question being, "if" I was to use my son's ABN, apart from the legalities involved, what if any other factors would this involve?
A few that come to mind are;
It would have to be registered in my son's name; and
It would incur higher registration and insurances(due to the vehicle being a business machine).
Any advice is greatly appreciated.
This Thread has been Archived
Reply By: Jason (macca) - Thursday, Mar 30, 2006 at 18:53
Thursday, Mar 30, 2006 at 18:53
Glad you asked this question and I will follow any replies with great interest. I am looking to replace my 2001 Prado and get asked the ABN question each time I go to a dealer.
I notice that anyone can apply for an ABN and that its free.
If I just apply for an ABN and then give that ABN to the dealer, will this do?
Follow Up By: Member - Oldplodder (QLD) - Thursday, Mar 30, 2006 at 19:18
Thursday, Mar 30, 2006 at 19:18
Have company car through my company.
I am not an accountant and I would suggest you should talk to your sons accountant before doing anything.
Good points - slightly cheaper purchase price.
company pays for maintenance and fuel.
tax deductable to company.
Only tax deductable if you are making enough profit to cover the costs!
would your son be willing to downgrade the company profit to support your car?
May be liable to Fringe benifits tax.
If you buy it out right, tax depreciation claim is usely more than you loose through market value each year, so you may have to pay tax on any 'profit' you make when you sell it.
rego and insurance
will be more.
most probably 6 other things have not listed.
You could register for an ABN number, but you will have to put in a return each year, also see good and bad points above.
Reply By: Wayne (NSW) - Thursday, Mar 30, 2006 at 19:38
Thursday, Mar 30, 2006 at 19:38
Just a small point. When you say ABN number it is like saying Australian Business Number Number. There is only one number in ABN.
Remember a few years ago, The bottom of the Harbour Scheme and the $2.00 company.
I have a ABN and it did at the time cost about $700 dollars. Before you can get one you have to prove to your accountant that you are going to set up a business. Tax returns with proof that you are in business and making money. A finance company will not lend you money if you are not making any.
Your son could buy a vehicle with his ABN but you would have to proof that you work for him and that you are drawing a wage. Again tax returns are proof of this.
The vehicle would have to be registered in the company name, and with that all the extra cost with very little return.
If it was simple then a lot of people would be doing it.
Follow Up By: Leroy - Thursday, Mar 30, 2006 at 19:45
Thursday, Mar 30, 2006 at 19:45
hmm you mean 'an' ABN not 'a' ABN......
Follow Up By: revhead307 - Thursday, Mar 30, 2006 at 23:02
Thursday, Mar 30, 2006 at 23:02
Actually Wayne you're talking about an ACN (Australian Company Number) and the $700 would have been the cost of the shelf company that was bought. (which you and/or spouse were made sole shareholders/directors of...and costs us $X a year in annual return costs)
ABNs are free (unless your accountant lodges the application) and can be applied for on the net and received straight away online. The only came in,in 2000 with the introduction of the GST long after bottom of the harbour schemes were just textbook examples for pimple faced kids.
Having said that an ABN should only be applied for by a legitimate business/contractor etc.
Follow Up By: Member No 1- Friday, Mar 31, 2006 at 07:10
Friday, Mar 31, 2006 at 07:10
the $700 was the cost of setting up a legal entity with securities commision..
any one can apply to the ato for a ABN
I beleive the ABN is assists the dealer for trade in purposes....he can claim the cost of GST whereby he cant on a private sale?
Follow Up By: revhead307 - Friday, Mar 31, 2006 at 10:29
Friday, Mar 31, 2006 at 10:29
Correct, the 'legal entity' being a Pty Ltd company. They can either be registered direct with ASIC or purchased as a shelf company which is very common. There are Businesses who register companies (as its a much quicker process)...then on sell it 'off the shelf' so to speak when a business wants to have a corporate structure, just shareholders and directors are changed.) either way it was either to ASIC or a shelf company provider for a PTY LTD (P/L) company, in your case ASIC.
The dealer can only claim GST off your trade in if you are registered for GST.
If your ABN is linked to a company or trust, DONT BUY the vehicle until you talked to your accountant, or you will end up with more crap than you will want to handle, and potentially very costly.
Reply By: bigcol - Thursday, Mar 30, 2006 at 19:49
Thursday, Mar 30, 2006 at 19:49
Because it would be purchased through your sons company, when you sell it the sale price would also be subject to GST.
Reply By: PK Eildon (VIC) - Thursday, Mar 30, 2006 at 19:53
Thursday, Mar 30, 2006 at 19:53
I don't know, but I have ABN and when I went to purchase last vehicle asked accountant about it. Her answer was simle. Don't go there. There are different ways of being taxed, so if it is claimed under GST you will get hit under Fringe Benefits and others and required to keep log books etc. The answer I believe would be different if the vehicle was being bought for use by the business itself.
I would suspect the salesmen are not selling cheaper with ABN, there is probably a 10% GST allowance where the transaction is put into 1 for the tax dept instead of a debit transaction by ABN holder and credit by the yard.
Simle answer, see your accountant.
Reply By: howie - Thursday, Mar 30, 2006 at 19:53
Thursday, Mar 30, 2006 at 19:53
Im asked by salesmen "do you have and ABN number"
tell the salesman that the letters 'abn' stand for australian business number
so there is no need to ask for an 'australian business number number' and don't reveal your personal identification number number to him either either.
on a serious note, i paid just over $7000 less than the nissan dealers price by buying from a perth
lease company, but i am a small (and cuddly) businessman.
like the others have suggested, the rego & insurance
might have to be your sons name, you would have to ask your accountant and lease company what they require.
Follow Up By: Member - Blue (VIC) - Thursday, Mar 30, 2006 at 21:19
Thursday, Mar 30, 2006 at 21:19
It's kinda like "The Australian Record Industry Awards Awards" ARIA awards...???
Follow Up By: Jason (macca) - Thursday, Mar 30, 2006 at 23:11
Thursday, Mar 30, 2006 at 23:11
Or the ATM machine (Automatic Teller Machine Machine)
Reply By: Brad - Thursday, Mar 30, 2006 at 20:08
Thursday, Mar 30, 2006 at 20:08
I bought my Bravo 4x$ approx 5 years ago and had the same thing happen. There are however, a few thjings that have been mentioned that are not quite true.
You don't have to prove to your accountant that you are setting up a small business to get an ABN and you can now apply for them on line for free. Although all companies have to have them, if you are a small business you will need one as well. To give an example, I have a full time job. I also used to have a small business (sole trader) that I ran from home. I registered for an ABN, however, I did not register for GST as I did not need to ( turnover was less than $50K ). When I purchased my Bravo I was asked if I had a an ABN to which I replied yes. All the salesman wanted to see was my ABN certificate. Where he got caught out was that he then asked me for a receipt for the amount that he was giving me as a trade in. I gave him one and he adjusted it as he said I had not allowed for GST. Not being registered, it was illegal to add GST tothe invoice, therefore the salesman lost out on the GST input credit. The truck was registered in my business name and when I went and put my personalized number plates on I changed the name.
Reply By: Member - TonyG (Qld) - Thursday, Mar 30, 2006 at 20:19
Thursday, Mar 30, 2006 at 20:19
I have done this a few times for friends using my ABN.
It is a very simple process, and very legal.
The sales staff at the dealership only want the ABN to allow them to apply the fleet discount, no other reason. There is no tax fraud, or anything else.
By purchasing the vehicle with the assistance of an ABN, you get the fleet discount, but you can not claim the GST as a tax deduction, like a business can.
When purchasing the vehicle, quote your relatives ABN as requested, but state the following to the salesman, and he will have no concerns:
- The vehicle will be purchased in a private name, not company name.
- The vehicle will be financed in a name outside the company name.
- The vehicle will be registered in a private name, not company name.
As long as you tell them this information upfront, and they process the paperwork accordingly, everything is fine.
You should save between $5k to $9k depending on the purchase price, I have found you get a saving of approx 10% of retail price.
Hope all goes well
Reply By: lindsay - Thursday, Mar 30, 2006 at 20:20
Thursday, Mar 30, 2006 at 20:20
I am a small business person and i by a 4x4 through my business.(agricultural contracting) When you are in registered business and that vehicle is being used wholly or partially for that business you can claim the G.S.T. 10% back when you do a BASS return and you get the 10 % back from the tax office. The repairs and rego, fuel ect. can then be used as a tax deduction. Because we don't wholly use it in our business (82% worked out by a log book over 3 months) we can only claim back 82% of our inputs. The catch is it is then depreciated by the tax office and if you sell it above the depreciated value, that portion then becomes taxable. You must prove you are a business to get an A.B.N. and you must prove that the vehicle is used for that purpose. If you have ever been audited by the tax office and asked what you were doing at Birdsville
on a certain date and how did it have anything to do with you business you will realise that it is not worth it.
An A.B.N. will not buy you a cheaper car, apart from the G.S.T. portion that you will get back and is only a marketing ploy by the sellers. The log book declaration must be redone every 5 years if that is the way you wish to claim. There is a couple of other ways that it can be done, one is just 5% without any need for a log book compliance .
Reply By: Member - Craig D (SA) - Friday, Mar 31, 2006 at 06:58
Friday, Mar 31, 2006 at 06:58
Just bought my new Patrol and I definately used my ABN from a previous business (the ABN is still active on the registry) and saved a neat little $8.5K off the purchase price as well as the dealer had already discounted the car by $3k. The car is registered in my own name and not of the business - I requested this from the dealer and they had no qualms. Registration did increase, but only because I bought a ute and hence it's classified as commercial however my insurance
remained the same. The dealer also merely looked up my name on the ABN register on the internet and ticked off a box on his paperwork - it's that simple. So, is it worth it? Yep!
Reply By: Member - Oldplodder (QLD) - Friday, Mar 31, 2006 at 07:58
Friday, Mar 31, 2006 at 07:58
I reckon TontyG and CraigD have the answer you need for your situation.
Reply By: Member - Landie - Friday, Mar 31, 2006 at 08:16
Friday, Mar 31, 2006 at 08:16
Gee..I reckon I'd want to talk to a good accountant before I started claiming GST input credits on vehicles that are not being used in a business. The whole basis of the GST system.
In the case of a vehicle if you are claiming input credits and it is used for private purposes than it will be subject to the FBT tax. This is the case for individuals who are given a car as part of their salary package.
I always reckon there are two things you can't cheat in life....death and the taxman. If it was as simple as providing an ABN to get 10% off everyone would be marketing it and doing it. The reason it doesn't happen is that there are a lot of ramifications to doing it. The salesperson couldn't careless after all you are the one making the claim, not him.
Follow Up By: Member - TonyG (Qld) - Friday, Mar 31, 2006 at 17:39
Friday, Mar 31, 2006 at 17:39
The whole point is you DO NOT claim the GST.
You just get the fleet discount from the car dealership.
Reply By: camship - Friday, Mar 31, 2006 at 10:42
Friday, Mar 31, 2006 at 10:42
I am a former car salesman, and now a car broker.
ABN number usually does not gain a genuine fleet discount, the salesman will tell you it does, becuase if he does'nt you won't be happy, especially if you come across somebody that says it does gain a fleet discount.
All you are gaining is a retail discount, ie. lowering of the dealer margin.
A fleet discount is a rebate from the manufacturer usaually between $500 and $1500, this added to the retail discount may be up to about 15% off the retail price.
On some vehicles (very few) there is a genuine fleet rebate for ABN holders, usaually Rodeo and Hilux. But all in all it makes very little difference.
If you are a confident negotiator (it doesnt pay to be a smart arXX and pxxx off the salesman) you can get a great deal yourself, ABN or not. Otherwise use a proffessional.
Reply By: Member - Mike DID - Friday, Mar 31, 2006 at 13:29
Friday, Mar 31, 2006 at 13:29
When I worked for a large corporation I obtained a letter stating that I QUALIFIED for a Leased vehicle or a Novated Lease Vehicle - this was all Mitsubishi needed to give me Fleet Discount.
I registered the vehicle privately in my own name and I did not take out a Novated Lease.
Getting a Fleet Discount is controlled by the car manufacturer - it has nothing to do with Regulations and laws. If they will let you register the vehicle privately in your name - regardless of the ABN details, then go for it.
The Salesman is on your side - reducing the price to you gives him competitive advantage over other offers.
Reply By: macca172 - Friday, Mar 31, 2006 at 18:35
Friday, Mar 31, 2006 at 18:35
Thank you for your interesting and informative replies, re "an ABN".
With the information your supplied, I contacted an accountant today and a short summary of his advice I was given, is as follows:
1. Apply for an ABN in my name(yes its a free service...wonders will never cease):
2. Call the company in "my name". Not a Pty Ltd, Incorp etc:
3. Yes I do intend to make a profit(for ATO purposes, 1 cent is a profit): and
4. The day after I purchase the car, I decide for whatever reason(medical reason a good one), that I do not wish to proceed in forming my business.
As stated in the responses, all the dealer wants is the ABN; in that he can do his thing with the car suppliers.
Finally, the accountant advised that it is all above board and legal. He also said he was having a great day basket weaving in Long Bay Goal(TIC).