Tax deductability.

Submitted: Thursday, Mar 30, 2006 at 10:21
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hello everyone, if I can pick a few brains.
Under what circumstances is a vehicle 100% tax deductible. Just Reading Jeff's post below, and was always told that log books are required to work out what % is business related. Does payload make certain vehicles 100% business (ie commercial).
Have had differing opinions. One mate with a patrol ute claims he needs no log books for 100% tax deduction.

Look forward to some insightful answers.

P.S No I have not done a search.
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Reply By: bombsquad - Thursday, Mar 30, 2006 at 10:25

Thursday, Mar 30, 2006 at 10:25
I'm sure in the past any vehicle used SOLEY for work purposes could be claimed at 100%. To justify this, I had to have a second car for personal use, and my work was also based out of my home address as you cannot claim transport to and from your primary place of employment, but can claim travel between different workplaces.

I am not an accountant though.....but I have dealt with the taxation department a few times and was pleasantly surprised! If you can justify the expense, they usually accept it.

Cheers Andrew
AnswerID: 163845

Follow Up By: conman - Thursday, Mar 30, 2006 at 10:31

Thursday, Mar 30, 2006 at 10:31
yeah thanks Andrew,

I can only get about 50% (from log books) for my ute. Just wondering if there are any rules that make a vehicle 100% commercial (ie single cab, 1 tonne payload.)
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Reply By: Member No 1- Thursday, Mar 30, 2006 at 11:14

Thursday, Mar 30, 2006 at 11:14
a vehicle ute etc capable of carrying a 1 ton is generally considered 100% deductable.......
i have a 100 series which i pay a small premium by way of fringe benefits tax...i am spposed to keep log book.....12 weeks continous logging lasts for 5 yrs i think

the mechanics have vans which do not require logbooking or payment of fringe benefit

go to ATO site and do search for log book....

AnswerID: 163853

Follow Up By: Member No 1- Thursday, Mar 30, 2006 at 11:19

Thursday, Mar 30, 2006 at 11:19
correction...i used (lol lol) to keep a log book, but went the other way and just paid fringe benefits to keep the mongrels off my back in the event that they did an audit....this was advice from the accountant

after all...it, the truth, would have to be stretched somewhat if they ever did...lol lol
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Reply By: Robjo - Thursday, Mar 30, 2006 at 11:37

Thursday, Mar 30, 2006 at 11:37
It is certainly possible...here are some of the details...

FRINGE BENEFITS TAX : DUAL CAB VEHICLES ELIGIBILITY FOR EXEMPTION WHERE PRIVATE USE IS LIMITED TO CERTAIN WORK-RELATED TRAVEL
PREAMBLE
Generally speaking, a liability for FBT arises where an employer's motor vehicle is used by an employee for private purposes or is available for the private use of an employee. However, under sub-sections 8(2) and 47(6) of the Fringe Benefits Tax Assessment Act ("the Act"), a liability for FBT will not arise where the private use of certain vehicles by employees during a particular year of tax is limited to certain work-related travel. Work-related travel is defined in sub-section 136(1) of the Act to be travel between the employee's residence and place of employment or other place at which employment duties are performed and any travel that is incidental to travel in the course of performing duties of employment.
2. This Office has been asked whether vehicles known as dual cabs are capable of qualifying for this work-related use exemption. Broadly, dual cabs are variants of conventional goods vehicles under which additional seating positions are provided behind the driver and front-passenger seats. They share a common chassis to which the single or dual passenger cab and alternate tray sections may be fitted.
3. Vehicles that may qualify for this exemption are, firstly, those that are not classified as a car (as defined in sub-section 136(1)) for the purposes of Division 2 of Part III of the Act, i.e. vehicles other than -
.
a motor car, station wagon, panel van, utility truck or similar vehicle; or
.
any other road vehicle designed to carry a load of less than one tonne or fewer than nine passengers.
Such vehicles may qualify for the work-related use exemption under sub-section 47(6).
4. Alternatively, under sub-section 8(2), a vehicle may qualify for the exemption if, while classified as a car for the purposes of Division 2 of Part III of the Act, it is a taxi, panel van, utility truck or any other road vehicle that, while designed to carry a load of less than one tonne, is not designed for the principal purpose of carrying passengers.

RULING
5. The classification of motor vehicles under the FBT law is expressed in the same terms as that used in the income tax law e.g., sub-section 82AF(2) of the Income Tax Assessment Act, which applied to exclude from the income tax investment allowance certain motor vehicles. As such, the interpretation of those provisions provides an appropriate base from which to determine the operation of the FBT law.
6. Dual cabs, particularly those of lesser load capacities, are commonly fitted with styled steel well bodies and are often referred to as "utes" in advertising material. An initial question to be determined therefore in deciding the eligibility of dual cabs for the work-related use exemption is whether they qualify as "utility trucks" within the meaning of paragraph (a) of the definition of car in sub-section 136(1) and, accordingly, within the meaning of sub-section 8(2). If dual cabs are in fact utility trucks within the meaning of sub-section 8(2), it follows that they would qualify for the concession afforded by that sub-section irrespective of their load or passenger carrying design features.
7. The meaning of utility truck as expressed in sub-section 82AF(2) of the Income Tax Assessment Act - which is expressed in identical terms to the definition of car in sub-section 136(1) - was considered in Case M10, 80 ATC 77; Case 92, 23 CTBR(NS) 869. Based on that decision, the term utility truck as used in sub-section 136(1) and, accordingly sub-section 8(2), is seen as being restricted to derivatives of motor cars. Crew cabs could not be so described (see description in the preamble).
8. It follows that crew cabs will be capable of qualifying for the work-related use exemption only if either of the following tests are satisfied -
(a)
they are designed to carry a load of one tonne or more, or more than eight passengers (sub-section 47(6)); or
(b)
while having a designed load capacity of less than one tonne, they are not designed for the principal purpose of carrying passengers (sub-section 8(2)).
9. Current model crew cabs have a maximum seating capacity of seven and, as such, could not qualify under the second limb of (a).
10. Whether a particular vehicle is designed to carry a load of one tonne or more is to be determined on the same basis as that applied in determining eligibility for the former income tax investment allowance.
11. Consistent with that approach, the designed load capacity of a motor vehicle is to be taken as the gross vehicle weight as specified on the compliance plate by the manufacturer (broadly, the maximum all-up loaded weight), reduced by the basic kerb weight of the vehicle. For this purpose, basic kerb weight is synonymous with unladen weight, as specified in the Australian Design Rules, being the weight of the vehicle with a full tank of fuel, oil and coolant together with spare wheel, tools (including jack) and installed options. It does not include the weight of goods or occupants.
12. In the case of cab/chassis vehicles, the designed load capacity is to be ascertained after the body has been fitted to the vehicle, i.e. to satisfy the one tonne test, the margin between the gross vehicle weight and the basic kerb weight must not be less than one tonne plus the weight of the body which is ultimately attached to the vehicle.
13. Where, on the application of this test, it can be concluded that a particular dual cab model has a designed load capacity of one tonne or more, there will be no FBT liability if employee use of the vehicle during a particular FBT year consists solely of eligible work-related travel.
14. As previously mentioned, a dual cab that has a designed load carrying capacity of less than one tonne may still qualify for the work-related use exemption, under sub-section 8(2), if the vehicle is not designed for the principal purpose of carrying passengers. It is considered that the appropriate basis for determining this issue is whether or not the majority of the designed load capacity is attributable to passenger carrying capacity. It is understood that this approach is consistent with that adopted under the Australian Design Rules in determining what is a passenger vehicle.
15. For this purpose the designed passenger carrying capacity is to be determined by multiplying the designed seating capacity (including the driver's) by 68 kg, which is the figure adopted for the purposes of the application of the Australian Design Rules.
16. If the total passenger weight so determined exceeds the remaining "load" capacity, the vehicle is to be treated as being designed for the principal purpose of carrying passengers and as such ineligible for work-related use exemption.
17. By way of illustration, if a vehicle has a gross vehicle weight of 2,000 kgs, a basic kerb weight of 1,400 kgs, and has a designed seating capacity of five, the vehicle would be considered to be a vehicle designed principally for the carriage of passengers. This is because the total load capacity is 600 kgs of which the majority, 340 kgs, would be absorbed by its designed passenger carrying capacity.
18. The position of current release dual cab vehicles has been reviewed on the basis of published information made available to this office. The results are detailed in the attachment.
19. Of those vehicles listed as being eligible for the work-related use exemption, the majority do so on the basis that they have a designed load capacity of one tonne or more. The remaining vehicles satisfy the requirement of not being designed principally for the carriage of passengers.
20. Accordingly, provided that employee use of these dual cab vehicles in a particular FBT year is restricted to travel to and from work and any travel that is incidental to travel in the course of performing duties of employment, there will be no FBT liability.
21. The two models listed as being ineligible for the concession are designed to carry a load of less than one tonne and, on the application of the test detailed above, are designed principally for the carriage of passengers.
AnswerID: 163855

Follow Up By: conman - Thursday, Mar 30, 2006 at 12:10

Thursday, Mar 30, 2006 at 12:10
WHOA!
that's quite an effort there. please tell me you cut and paste that. Or did you need typing practice. :-)

Many thanks.
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Follow Up By: Robjo - Thursday, Mar 30, 2006 at 12:22

Thursday, Mar 30, 2006 at 12:22
cut and paste...it is an issue close to my own heart...
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Follow Up By: Member - Landie - Thursday, Mar 30, 2006 at 13:29

Thursday, Mar 30, 2006 at 13:29
That is cetainly a comprehensive response!

It is important to bear in mind that to claim a tax deduction for any vehicle it needs to be a 'tool' involved in a business enterprise generating a taxable income.
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Follow Up By: Member No 1- Thursday, Mar 30, 2006 at 15:19

Thursday, Mar 30, 2006 at 15:19
thats what I said..if it can carry 1 ton it is exempt...providing there is no private use
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FollowupID: 418677

Reply By: Member - Wim (Qld) - Thursday, Mar 30, 2006 at 12:57

Thursday, Mar 30, 2006 at 12:57
conman.

The tax dept has a list of vehicles that do not atract FBT.

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AnswerID: 163871

Reply By: revhead307 - Thursday, Mar 30, 2006 at 13:58

Thursday, Mar 30, 2006 at 13:58
Hi Conman,

Up until 2 years ago I was a public practice taxation accountant for 7 years (now Im a local government accountant) still have the latest Master Tax Guide by my desk.

There is some good advice already posted above, however, its not specific to your situation until you answer the following:

1) what make and model is it
2) are u an employee, sub contractor, or run another style business.
3) who owns the vehicle (personal name, company, trust etc)
4) apart from travelling directly to and from work, what personal travel do u use it for? (if stop at supermarket on way home, trip camping etc etc)

With that info, I can let u know what the letter of the law states...what you do is up to you.

Regards

Rev

(yes, i had a V8, ive got a tattoo...and im not just a boring accountant)
AnswerID: 163880

Follow Up By: conman - Thursday, Mar 30, 2006 at 14:27

Thursday, Mar 30, 2006 at 14:27
Cheers Rev,

I am looking at it from the point of a sole trader. I need a ute for work (although I mainly use a truck) but obviously COULD use it for the occasional off road trip. It makes sense to me that you have to prove what percentage is for work via a log book kept for 12 weeks. It's just that I have friends that claim because it's a 2 door ute (commodore ss, patrol cab chassis) that they need no log books and can claim 100% as a business deduction. That's why I was wondering what list of vehicles this may apply to. 100% deduction obviously makes buying a car a lot more attractive!

I realise there would be a difference if I was registered company or a sole trader. I take it a company could OWN any vehicle and make it tax deductible!

Sorry to bore anyone with these tax things.

P.S Rev, I realise I may have to wait until your next lunch break for a reply. :-))
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FollowupID: 418666

Follow Up By: revhead307 - Thursday, Mar 30, 2006 at 16:06

Thursday, Mar 30, 2006 at 16:06
Hi Conman,

I'm always on lunch lol (i wish).

Unfortunately, Tax is an area where everyone has a mate who is claiming 'something' rightly or wrongly. The slightest change in circumstances can change the application of tax law.

This is a little lenghty, so bear with me...and ask questions if you need clarification.

We are talking here purely about 'motor vehicle expenses', motor vehicle expenses are covered by a strict set of rules for claiming, eg cents per kilometre method, 1/3 actual, 12% original value method or log book:

The ATO definition of 'motor vehicle' covers cars, panel vans and utes with a carrying capacity UNDER 1 tonne. So if u had a Commodore or a small ute u would need to keep a log book.

Utes/vehicles with a carrying capacity of 1 Tonne or more arent subject to the 'motor vehicle substantiation' rules (ie log books etc). Most farmers and builders etc with vehicles like these claim 100% (within reason). Put simply they arent classed as a 'motor vehicle' under the definition, so they are claimed as a general deduction.

an example is if an 8T truck is used...its claimed as a general business deduction and not under the special motor vehicle area.

If your friends SS Ute is under 1 Tonne capacity then technically he does require a log book. (recording ALL travel for 12 weeks is difficult to substatiate 100% deduction.)

Tho a patrol (if rated over 1 Tonne) wouldnt need a log book.

OK...now all that aside...

Vehicles over 1 Tonne capacity are treated like any other asset. If you use a laptop or photocopier 100% for work, then u can claim 100% of running expenses and 100% of depreciation on the asset.

But if your laptop is used 80% work 20% games then only 80% of running expenses and depreciation is deductible etc.

Therefore If you regularly use your Big Ass Ute (over 1 tonne) for camping etc etc...you have to use a reasonable estimate on the % business use.

As mentioned before...farmers, builders etc often claim 100% tho we know they take them fishing etc etc ...Put simply a lot of people get away with claims they shouldnt as they use commercial vehicles for a reasonable % private use, but as they dont require a log book, they tell their accountant 100% business use...and the accountant doesnt question them....

Hope this has helped a little. feel free to ask for clarification.

Rev

Obviously this is general info (not advice) from some internet freak named Rev lol.
But any good tax accountant will tell u the same.



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FollowupID: 418687

Follow Up By: conman - Thursday, Mar 30, 2006 at 16:17

Thursday, Mar 30, 2006 at 16:17
So I take it the winch, suspension lift, snorkel, diff locks are a bit of a give away that it's not PURELY for work. Thanks so much for that. Why can't the ATO put it that simply.
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FollowupID: 418691

Follow Up By: revhead307 - Thursday, Mar 30, 2006 at 17:36

Thursday, Mar 30, 2006 at 17:36
I think Member no 1 was the most succinct lol

Member No 1 posted this followup
"thats what I said..if it can carry 1 ton it is exempt...providing there is no private use "

The providing there is no private use tho is the key..whether it is declared or not is another matter.

Winches, suspension, difflocks and snorkels need not be private, they are an accessory to the vehicle itself and aid its operation. (rod holders and baby seat are private) the winch might need some creative thinking lol

The ATO does not discriminate about whether something is a good business decision (therefore deductible) its whether it is spent in carrying on a business.

Ie spending $10,000 on advertising in a Sydney newspaper for a fruit stand on the beach in Perth would be stupid...as it wouldnt attract any customers...however it would be deductible. They cant say, you have diff locks, so u must be a 4x4 enthusiast.

Regards

Rev

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FollowupID: 418713

Reply By: Member - Wim (Qld) - Thursday, Mar 30, 2006 at 15:19

Thursday, Mar 30, 2006 at 15:19
conman.

This may be of help.

Site Link

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AnswerID: 163891

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