car allowance-perhaps Accountant advise please.

[TIC-302]

I just needs some info from people who have/had car allowance through their work.

I am looking at a job where they are giving 10k pa car allowance.

I've always had works car.

can i use it as a novated lease with a new car or can i buy a used car and spen my 10k a year on it via, repayments, service, rego ,insurance?

cheers

[Rodp]

10k is just on top of your salary. How you choose to use it towards your vehicle is completely up to you.

I do a logbook every ~5 years for 3 months to determine my work usage (I always claim 85%) and all expenses - fuel, rego, insurance, depreciation, tyres, etc that it costs to run my car I claim as a tax deduction.

10k seems a little low which would make me assume that you won't be using your vehicle that much for work? I get 15k and I find that exceptionally low since it's the same amount of money I was getting nearly 20 years ago and the cost of running a car has skyrocketed.. :(

Anything specific you needed to know?

[TIC-302]

the question i have is what happens if my total yearly cost to maintain the is less then 10k? what happens then, how will the tax dept handle that?

Also if i spend the whole amount (10k) in one year, will the tax dep leave me alone or am i subject to FBT?

[Rodp]

Originally Posted by TIC-302

the question i have is what happens if my total yearly cost to maintain the is less then 10k? what happens then, how will the tax dept handle that?

Also if i spend the whole amount (10k) in one year, will the tax dep leave me alone or am i subject to FBT?

My car expenses are ~$30k per year. I'm obviously the wrong person to ask.

As far as I'm aware, the tax department don't know what my car allowance is looking at my group certificate, nor do they care. I claim against my taxable income at the end of the year. I would assume you were the same, except that you would be claiming less.

[TIC-302]

ok.

what happens if i end up getting a more expensive car and my expenses come to 20k a year.

now i've spent another 10k, is this 100% tax deductable at the end of the year?

[FPVF6X201]

I also have a 15k car allowance. That barley covers my repayments. My claims usually amount to 28-35k per year. The 15k (or 10k in your case) is listed as a "reportable payment" on your group certificate. However, you can fill in a "tax variation witholding declaration" via the tax office telling them that the whole amount, 100%, will be used for the vehicle for work related purposes, this way, you dont pay tax on the car allowance portion of your salaray. You need only be over that amount by a few hundred and they wont come looking for FBT. If you end up claiming several thousand more, as i do, you dont get 100% of it back, you only get back your nominal tax rate (21-48% depending on your base salary). In reality you dont really get anything back, they just reduce the taxable salary. So if you earn 50k, get 10k CA, then claim 15k for the car, they theoretically reduce your 50k to 45k and thats the amount you pay tax on. Got it lololol. Honestly for the $70-$100 that an accountant will charge you, it's best to let them sort it for you.

As above, 10k is pretty low, and as above, i have had 15k for about 6yrs and the cost of fuel alone has virtually doubled in that time.

[Rodp]

Originally Posted by TIC-302

ok.

what happens if i end up getting a more expensive car and my expenses come to 20k a year.

now i've spent another 10k, is this 100% tax deductable at the end of the year?

I can only explain what I do (well, what my accountant does) - there may be other methods. My car expenses are ~30k and I claim the business portion as a tax deduction, 85%. So as above, if my salary for the year was $100k, the deduction reduces my taxable income to $75k. The difference in tax that I paid is returned to me.

You have no obligation to keep your expenses under $10k. If you go above it, you're essentially paying out of your own pocket. If you don't do that much business driving then you may not be able to claim much as a deduction.

[Curly56]

For 10k I would not go near it. Nearly half of that would be burnt in fuel, then there is rego 800, insurance 600, not much left for repayments and servicing. I get just under 15k and that barely, well it doesnt cover costs for 20 klics a year.

[TIC-302]

IS A DUEL CAB UTE 100% tax deductable or is it still worked at like a sedan, % of private and business use?

i was told utes ( ie 2 seats) are 100% deductable, but duel cab utes are treated by the ATO as sedans therefore not 100% tax deductable.

has anyone got experience with duelcab utes and car allowance?

[wrongwaynorris]

Originally Posted by TIC-302

IS A DUEL CAB UTE 100% tax deductable or is it still worked at like a sedan, % of private and business use?

i was told utes ( ie 2 seats) are 100% deductable, but duel cab utes are treated by the ATO as sedans therefore not 100% tax deductable.

has anyone got experience with duelcab utes and car allowance?

Yes the definition they work on is if it has forward facing rear seats with seat belts fitted .

[Curly56]

Originally Posted by TIC-302

IS A DUEL CAB UTE 100% tax deductable or is it still worked at like a sedan, % of private and business use?

i was told utes ( ie 2 seats) are 100% deductable, but duel cab utes are treated by the ATO as sedans therefore not 100% tax deductable.

has anyone got experience with duelcab utes and car allowance?

Mine is a dual cab and has been on a 100% deduction, as filed by my accountant and he showed me the little book that says it can be so.

[SB.1]

Thought I might be able to help here - the ute definition is only relevant for FBT purposes. FBT only applies to employers, so in the case of how you spend a car allowance it is totally irrelevant.

As an individual you will be able to claim back against your car allowance using one of four methods:

1. The cents per kilometre method - 70-75 cents per business kilometre limited to 5,000 kms per annum - no records need be kept, you just have to make a reasonable estimate of the number of business kms travelled.

2. The operating cost method - keep a log book for 12 weeks once every 5 years and keep all of your receipts. From that you calculate a business % which you can then apply against all of your expenses plus depreciation and interest (if you own the car) or lease payments (if you lease it), subject to the luxury car limit of $57K.

3. One third of operating costs method - as in 2 but no log book need be kept, but you are limited to 1/3 of your operating costs - usually will not work out very well for you.

4. 12% of Purchase Price of your car - no log book, no need to keep receipts. 12% is limited to the luxury car limit ($57K) so probably not going to work out very well.

Number 2 is usually the best to go for when you are doing any more than 5,000-10,000 business kms per annum. Keeping a log book for 12 weeks, once every 5 years is really not that big of an ask IMO - you are keeping one 5% of the time you are out on the road.

[Cheech]

Also, watch out for the tax implication of leased vs. ownership.

Lease payments are claimable as an expense but you don't get to claim the big banana (depreciation). If the vehicle is owned you can claim it as a depreciating asset with a 22.5% reducing depreciation rate. So in the first year a 45k car gets a depreciation expense of $10012.50. Add to this your fuel,rego,insurance, maintenance and your up around 18-20k.

In the above case of a 10k allowance (if 100% business use) you would get a deduction on your taxable income of 8-10k. If your an average worker your top tax rate is 31.5%. So you'd be entitled to refund of $2520 - $3150 (8-10k @ 31.5%)

FYI I get a 10k yearly car allowance.

[z80]

Get a car allowance and a company fuel card.
That's the way it was always sold to me.


Or car allowance and cents per kilometre allowance on top of the standing car allowance....

[Rodp]

Originally Posted by Cheech

If the vehicle is owned you can claim it as a depreciating asset with a 22.5% reducing depreciation rate. So in the first year a 45k car gets a depreciation expense of $10012.50. Add to this your fuel,rego,insurance, maintenance and your up around 18-20k.

It's definitely 22.5%? I think my accountant works on the basis of it being around 12.5%?

[SB.1]

It's actually 25% using the diminishing value method - i.e 25% in 1st year, 25% of remaining balance in second year etc and 12.5% under the prime cost method - i.e. 12.5% every year.

The prime cost method will not catch up to the diminishing value method until the 7th year, so is definitely more beneficial depending on your situation.

It is only a timing difference - it nets out on disposal as you will have a smaller remaining balance to write off against your sale proceeds under diminishing value method.

Depreciation plus interest can get you a bigger deduction that leasing but it depends how your lease is set up. Best off talking to your accountant and getting them to run comparative numbers.

[TIC-302]

Originally Posted by Curly56

Mine is a dual cab and has been on a 100% deduction, as filed by my accountant and he showed me the little book that says it can be so.

can you advise how he does it?