When purchasing a commercial vehicle through a company, especially if you plan to use it privately, you must consider important tax implications.
This is because, according to Australian tax law, there is a distinction between types of vehicles, which can impact tax deductions, GST claims, and even Fringe Benefits Tax.
How might this impact you? Let’s take a look at a commonly purchased vehicle – the Toyota Hiace – and how the variants of the Hiace can alter your tax obligations.
Hiace Van vs Hiace Crew Cab: Understanding the Tax Differences
Toyota offers two main variants of the Hiace: the HiAce Van, which has a carrying capacity of one tonne, and the Hiace Crew Cab, which has a slightly lower capacity, falling under one tonne.
This difference is more than just practical—it changes how each vehicle is classified under Australian tax law.
- The Hiace Van (carrying one tonne or more) is considered a motor vehicle other than a car.
- The Hiace Crew Cab (carrying less than one tonne) is classified as a car for tax purposes.
While both are designed for commercial use, the Crew Cab’s classification as a “car” has specific consequences.
Under tax law, cars have capped depreciation limits (currently around $67,000), but vehicles not primarily designed to carry passengers, like the Crew Cab, are exempt from this cap. This allows businesses to claim depreciation and the full GST input tax credit, even if the purchase price exceeds the car limit.
Fringe Benefits Tax: A Crucial Distinction
FBT is where the most significant distinction arises.
- For vehicles classified as “cars”, the statutory method generally applies. This method calculates the FBT liability as 20% of the car’s purchase price, regardless of actual usage.
- For vehicles that are not “cars”, a different approach is required. The ATO allows the cents-per-kilometer method, which is more usage-based and can be more favourable if private use is limited.
However, a common misconception is that commercial vehicles are automatically exempt from FBT. This exemption only applies if private use is minor, infrequent, and irregular. The ATO defines this as:
- Total private use of less than 1,000 km per year
- No single private journey exceeding 200 km
This equates to roughly 20 km of private use per week. If private usage exceeds these thresholds, the vehicle becomes subject to FBT, meaning the method of calculation becomes especially important in managing tax obligations.
Electric Vehicles (EVs) and the FBT Exemption
Electric vehicles attract attention due to government incentives, including potential FBT exemptions.
However, these exemptions apply only to EVs classified as “cars” under the tax law. EVs with a carrying capacity of one tonne or more are not classified as cars and therefore do not qualify for the FBT exemption.
There is ongoing speculation around the longevity of the EV FBT exemption. While current government policy supports the exemption, this could be subject to change at any point. Those considering an EV purchase may want to explore financing options.
Existing examples, such as with Plug-in Hybrid Electric Vehicles (PHEVs), suggest that maintaining a financial commitment (like a lease or loan) may allow continued access to exemptions even if policies change. While no outcome is guaranteed, financing an EV may offer some strategic flexibility.
Choosing the right vehicle for your business isn’t just about size, function, or brand—it has material tax and FBT implications, particularly when private use is involved. The classification of the vehicle, how it is used, and even whether it’s electric can all influence its tax treatment.
It’s advisable to consult a tax professional before purchasing a vehicle through a company, especially where private use is expected. Proper planning and modelling can help to ensure the best outcome based on your specific usage patterns and business needs.
