Jack Malarkey

Well-Known Member
From the Australian Taxation Office’s Small Business Newsroom:

Cars and tax

From 1 July 2019 the following car threshold amounts apply.

Income tax

There's an upper limit on the cost you use to work out the depreciation for the business use of your car or station wagon (including four-wheel drives). You use the car limit that applies to the year you first use or lease the car.

The car limit for 2019–20 is $57,581.

Goods and services tax (GST)

Generally, if you purchase a car and the price is more than the car limit, the maximum amount of GST credit you can claim is one-eleventh of the car limit amount.

You can't claim a GST credit for any luxury car tax you pay when you purchase a luxury car, regardless of how much you use the car in carrying on your business.

Luxury car tax

From 1 July 2019 the tax threshold for luxury cars increased to $67,525.

The threshold for fuel efficient luxury cars for the 2019–20 financial year remains at $75,526.

In general, the value of a car includes the value of any parts, accessories or attachments supplied or imported at the same time as the car.

Find out about:

Car cost limit for depreciation: https://www.ato.gov.au/Business/Dep...tions/?page=3#Car_cost_limit_for_depreciation

GST and motor vehicles: https://www.ato.gov.au/business/gst...vehicle-and-transport/gst-and-motor-vehicles/

Luxury car tax rate and thresholds: https://www.ato.gov.au/rates/luxury-car-tax-rate-and-thresholds/

When LCT applies: https://www.ato.gov.au/business/luxury-car-tax/when-lct-applies/


(https://www.ato.gov.au/Newsroom/smallbusiness/Lodging-and-paying/Cars-and-tax/?sbnews20190710)
 
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Jack Malarkey

Well-Known Member
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  • #3
Thanks Jack. I have a question. What is the depreciation rate? Is it 12.5% or 25%?
See the Australian Taxation Office’s depreciation rates for cars below:

68D429D0-2425-4894-85C7-CC3A0BCCBC32.jpeg


(https://atotaxrates.info/tax-deductions/work-related-car-expenses/depreciation-of-vehicles/)

(https://www.ato.gov.au/law/view/view.htm?docid="TXR/TR20195/NAT/ATO/00001")

As per the table above, cars generally are treated by the Australian Taxation Office as having an effective life of eight years, which works out at 12.5% per year using the prime cost method.

Hire and travellers’ cars are treated by the Tax Office as having an effective life of five years, which works out at 20% per year prime cost.

Taxis are treated as having an effective life of four years, which works out at 25% per year prime cost.

I consider it appropriate to treat rideshare cars as equivalent to hire cars. On this basis, 20% would be the relevant prime cost rate.

There can be no doubt that using a car for rideshare results in accelerated depreciation due to the heavy use of the car and the heavier loads it carries compared with a car otherwise used in the course of working.

You have the option of self-assessing the rate if you can demonstrate that the rate selected is appropriate in your individual case.

I have chosen myself to self-assess at 25% prime cost (four years’ effective life).

You are limited to the general and self-assessed depreciation rates only if you bought the car before beginning the relevant rideshare or other business. I was in that position myself, having originally bought my rideshare car wholly for private purposes.

If you buy the car in the course of carrying on the business, you have the option (but not the obligation) to use the simplified and accelerated methods of depreciation for small business: https://www.ato.gov.au/business/dep...lified-depreciation---rules-and-calculations/.

For more information about claiming depreciation, see https://www.ato.gov.au/business/depreciation-and-capital-expenses-and-allowances/.
 
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