When using the statutory method, fringe benefits tax is based on the cost of the vehicle. The benefit in purchasing the vehicle prior to 31 March is that this cost is "notionally" reduced to two thirds of the original cost when the vehicle has been held for four years at the start of the fringe benefits tax year (1st April). This results in lower FBT costs.
Therefore, by purchasing your vehicle just one month earlier, a one-third reduction in fringe benefits tax one year earlier would result.
There are other issues to consider, including:
- The tax position on the sale or trade in of an existing vehicle
- If you are registered for GST, the level of GST allowed to be claimed as an input tax credit
- Whether the new vehicle is under the depreciation cost limit ($57,581 for 2016/2017) or not (sometimes this is an argument for delaying purchase until July)
- Method of financing the new vehicle, consideration of prepayment of leases etc
- Possible discounts available on vehicles in June "end of financial year sales"
- The most appropriate entity or name in which to acquire the new vehicle
- Trade in value, log books etc
We recommend that you talk to us about any transaction before the deal is finalised.
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This Newsletter, of necessity, has dealt with matters of a technical nature in general terms only. Clients should contact us for detailed information on any of the items in the Newsletter. No responsibility for loss occasioned to any person acting or refraining from acting in reliance upon any material in this Newsletter can be accepted by any member or employee of the firm.