FBT - older vehicles, reducing costs?

Submitted: Sunday, Mar 11, 2007 at 12:24
ThreadID: 43126 Views:4576 Replies:7 FollowUps:0
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I have had my 1996 pajero from new, 11 years old this march.
Run my own business, and the vehicle is supplied through the business.
So I pay FBT.
Vehicles bought for $46,000.00 new, do 25,000k plus a year so pay 11%.
There is one deduction for a vehicle older than 6 years of 30%.

So I pay $46,000 x 11% x 70% = about $3,500.00 a year in FBT.

But my vehicle is now worth about $10,000 if I am lucky, maybe $8,000.00

Have decided to keep it for another 5 years, by then it will be worth maybe $5,000.00, and I will still be paying $3,500.00 a year, plus maintenance.
(The tax deductability of a lease / new car is not an issue, I have other tax deductions that solve any problem with a small profit.)

Can I get a revaluation on the car for FBT?

Or do I need to sell it, and maybe buy it back for that to happen?
My accountant says the tax office may disregard a sell/buyback and declare it a tax dodge.

Has anyone done this? Any ideas?

PS - reason I am keeping it is the $5,000 odd of extras I have fitted (worth nothing on a trade in) and the body is still pretty good, just needs an new engine in a year or two for another 400,000k.
And why should I pay tax for owning a car through a business?

The dollars don't add up buying a new business vehicle, rather put the money into other investments that make money.

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Reply By: Motherhen - Sunday, Mar 11, 2007 at 13:02

Sunday, Mar 11, 2007 at 13:02
Hi Oldplodder - may i be so bold as to suggest you consult a taxation accountant about this? There may be a number of variables in your situation, but be assured, the ATO is always after its 'pound of flesh'. It would be well worth the expense of a consultation to get the best outcome for you.
Motherhen

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AnswerID: 226727

Reply By: Member - Tim - Sunday, Mar 11, 2007 at 13:40

Sunday, Mar 11, 2007 at 13:40
Hi Oldplodder,

Agree that the best person to ask is a tax accountant but I did believe that it was possible to revalue after the car was four years old. They can't justify the original purchase price for an eleven year old car. Alternatively just buy it off the company and have the company pay you a mileage fee every time you use your own car for work. This unfortunately means that you don't get paid for travel to and from your place of work but if you go straight to jobs from home that can be ok. Just thinking though - surely you have enough expenses if you are travelling more than 25k pa to offset against the FBT?

I know how you feel about keeping the car, mine is now seven years old and has been so reliable that I just don't want to get rid of it. When the lease ran out on mine I just bought it and took it out of the fringe benefits loop completely as I don't travel enough k's for work to really justify it. I think most of these equations depend on your own personal mix of tax and travel which is why you really need an accountant who knows the tax laws.

Tim.
AnswerID: 226734

Reply By: F4Phantom - Sunday, Mar 11, 2007 at 13:51

Sunday, Mar 11, 2007 at 13:51
I am also in a similar position and I am handing in my tax right now! I have a TD pajero as a work car. I found the best thing for me was own the car and deduct work expenses through my small business. I think there is a fine line somewhere in the middle where FBT and owership is 'neither here nor there' so I go the simple route of owning the car and as your car decreases more and more in value I think this proposition becomes better.
AnswerID: 226735

Reply By: Member - Oldplodder (QLD) - Sunday, Mar 11, 2007 at 15:45

Sunday, Mar 11, 2007 at 15:45
Thanks for the replies so far.
Have started talking to my accountant, but he feels there is no way of doing it.
I think maybe he just hasn't come across this case before, and neither has the ATO. They can't seem to see the advantage in keeping a car more than 4 to 6 years.

My travel use has now changed, was 90% work, now about 70% work, so changed from log book calc to statutory calc.

I work enough hours , generally 10 to 20 hours a week above what I get paid for, so the company paying the fuel bill on holidays is a bonus. Usually end up calling in to see a client or two on a trip anyway.

If I own the car and charge the milage, there is a limit of about $2,500.00/yr where the ATO start getting a bit ropey for the milage above that.

Only way I can think of is to by a lower milage model of what I have and swap the accessories over. Maybe an NK or NL pajero.

AnswerID: 226751

Reply By: Mikee5 (QLD) - Sunday, Mar 11, 2007 at 16:15

Sunday, Mar 11, 2007 at 16:15
Contact the ATO and put your case to FBT staff, if they agree with what you want get a private binding ruling. Nothing better than straight from the horse's mouth.
AnswerID: 226753

Reply By: _gmd_pps - Sunday, Mar 11, 2007 at 16:45

Sunday, Mar 11, 2007 at 16:45
Use your business vehicle 100% for business and a private vehicle for private purposes.. thats the most cost effective solution when you really need a vehicle for business unless you have an expensive private vehicle ..
good luck
gmd
AnswerID: 226755

Reply By: Member No 1- Sunday, Mar 11, 2007 at 18:27

Sunday, Mar 11, 2007 at 18:27
fuuuuuuk the expense...i went and bought a new one....same fbt..maybe a little higher cos its a TD...but hell its my money...well the company's..but i am the company

stop penny pinching if you can afford it
AnswerID: 226767

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