Should I buy a new vehicle for my business?
This is a popular question — whether that's because businesses are doing well or just because roads, and how we pay for them, are in the news.
It often pays to run through a list of checks before making the next commitment. Do I really need a new vehicle?
Some finance arrangements mean that you need to talk to the company that sold you the vehicle to refinance or purchase your current vehicle outright.
It also gives them a chance to sell you something new. While bright and shiny is always nice, just reality check whether you really need to splash out. If there's no legitimate reason other than ego, seriously consider keeping what you've got to keep debt down.
What is happening with my old vehicle? If you're trading in or selling your old vehicle remember there is GST to return on the trade if you originally claimed it and there maybe some tax to pay (or a loss to claim) depending on the value it is sold for.
Get the most recent asset ledger out and check its value to see what you might be in for when its sold or traded.
What are the tax advantages and disadvantages? The entity you use to purchase your vehicle will have an effect on how you account for its costs, expenses and GST.
For sole traders and partnerships what you can claim depends on what use is reflected in your log book, otherwise costs are limited to 25 per cent. A log book is really important — even at the minimum 25 per cent you may be asked to justify that percentage.
For companies if the vehicle is available for personal use Fringe Benefit Tax will apply but all costs are claimable. As a general rule if your vehicle is expensive and is available for private use a lot of the time FBT will be expensive.
There is an option for close companies to run a logbook also but get some advice to make sure you're aware of the costs.
Jeremy Tauri is an associate at Plus Chartered Accountants.
Phone: (09) 438 3322
Fax: 438 8455
134 Bank Street, Whangarei
If we had to sum up Brent and the team at Plus CA it would be - humorous, efficient, professional with a real focus on making your money work to its best ability for you...we will continue to deal with them even though we are moving overseas as we know they have our best interests at heart.
Jeremy thank you for your patience, assistance and general chit chat over the years. I would have absolutely no issue in recommending your services to everyone and anyone – in fact, I do.
We recently employed Jeremy Tauri of Plus Chartered Accountants and have been thrilled with the improved service we have received. Jeremy is really approachable and always available to answer queries. At his instigation we have set up quarterly meetings so that we are regularly reviewing our business and avoiding any ‘end of year surprises’.