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 nextcommitment. 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.
