It’s not uncommon to use an Australian Business Number (ABN) when purchasing a car, but there are some important things to consider if you’re looking to capitalise on end-of-financial-year (EOFY) deals.
You’ll need to consider tax, as well as post-purchase items like registration, insurance, maintenance, and repairs – and they’re important regardless of whether you’re purchasing as a company, sole trader, or have a home-based business.
Nissan Navara – EOFY deals currently available
With that in mind, here’s a brief overview of how you can benefit from purchasing a car with an ABN, especially with EOFY deals now on the table.
What is an ABN?
According to the Australian Government, an ABN is an 11-digit number identifying your business to the government and community.
In a snapshot, it allows you to identify your business to others when ordering and invoicing, claim Goods and Services Tax (GST) credits used to reduce GST liability, and get an Australian domain name for your website.
It’s important to remember not everyone needs an ABN – you must be running a business or other enterprise to be entitled to one.
What’s the difference of buying with an ABN?
Manufacturers will typically offer discounted ABN pricing on commercial vehicles (utes or vans) throughout the year.
SsangYong Musso – drive-away deals available
There are also potential deals for fleet purchases of multiple vehicles. Toyota is an example of a brand with detailed fleet plans for business buyers, which include purchase packages, services performed by dedicated technicians, ongoing business support, and vehicle accessories.
At EOFY, manufacturers will often offer further discounts for ABN holders.
For example, SsangYong is offering discounts of up to $3000 for ABN holders only on 2024-build Rexton SUVs and Musso utes. There are a few things to consider before you sign on the dotted line.
“If I was an ABN buyer, I’d be looking for something that’s in stock,” Waverley Mazda general manager Ravi Emaduwage told CarExpert.
“I’d want to make sure that I’m purchasing something this financial year, and that I knew what deals there were depending on what’s in stock and what I’m looking for.”
“ABN pricing gets you a large point of discount depending on which model you’re after.”
How can a business cut costs when buying with an ABN?
An advantage of buying with an ABN is you’ll be able to capitalise on a cheaper upfront price on select vehicles.
Mazda BT-50 – drive-away ABN deal
ABN discounts apply to commercial vehicles, which include vans and utes. Mazda, for instance, is currently offering reduced drive-away pricing on its BT-50 ute for ABN holders.
“With a BT-50, you’re entitled to a further bonus if you’re an ABN purchaser, so that could be part of a fleet campaign or if you’re buying one car of multiple cars,” Mr Emaduwage said.
“Depending on how many you’re buying or for a certain fleet, you can capture a certain percentage off depending on what type of car you’re going for.”
The Australian Tax Office (ATO) says business owners can claim input tax credits (GST credits) on the GST in the purchase price – as well as claiming the cost of the car as a tax deduction, which reduces taxable income.
According to the ATO, buying with an ABN implies the vehicle will be used for business purposes, at least in part. That means personal use cannot be claimed as a tax deduction.
Businesses can claim all business-related vehicle expenditure as a business deduction. When a car is used for business purposes, companies can claim a tax deduction on costs including finance loans, tolls, and parking fees.
To claim a deduction, a business or employee must:
- Own or lease the vehicle
- Not have been reimbursed for the vehicle or its expenses
- Have the required records to calculate deductions (logbook or cents per kilometre records)
- Only claim expenses on work-related trips
- Trips between workplaces or to perform work duties can be claimed
- Trips between home and the workplace cannot be claimed – except in limited circumstances, like driving from home to a workplace that isn’t your usual workplace
Volkswagen Amarok – drive-away deals available
If travel in the vehicle is partly private, you can only claim a deduction for the work-related portion of your expenses.
You also need to remember allowing an employee to use a work car for private purposes is considered a fringe benefit, which means it’s subject to fringe benefits tax (FBT). According to the ATO, FBT is a tax paid by employers on certain benefits provided to employees.
FBT is charged at 47 per cent of the gross taxable value of the fringe benefits, but employers can claim an income tax deduction and GST credits for the cost of providing fringe benefits.
Both companies and sole traders may be eligible for an immediate deduction under the instant asset write-off scheme.
That means if the cost of vehicle is less than $20,000, you can claim a portion of its value off your taxable income in that financial year.
What should be considered when it’s time to buy?
When purchasing a car, you can finance or buy it outright. The correct approach will vary from business-to-business.
Mitsubishi Triton – free tow pack offer available
There are also advantages to financing with an ABN, as loan costs can be claimed as a tax deduction for your business.
It’s likely a lender will ask for financial accounts and tax returns from sole traders to determine their ability to pay it back, so it’s important to have all documents updated and ready to go.
You can either opt for a fixed or variable interest rate loan, too, but the benefits and downsides are dependent on the specific circumstances of any given business. Like when purchasing a new vehicle yourself, research is key.
Disclaimer: The information on this website is for general purposes only and not a substitute for professional financial advice. CarExpert recommends seeking independent legal, financial, taxation or other advice unique to your individual circumstances.
DEAL: 2023 SsangYong Korando drive-away deal
DEAL: 2023 SsangYong Musso drive-away deals
DEAL: 2023 SsangYong Rexton deal
DEAL: 2023 Volkswagen Amarok drive-away deals
DEAL: 2024 Mazda BT-50 drive-away deals
DEAL: 2023 Mitsubishi Triton free tow pack
DEAL: 2024 Nissan Navara drive-away deals
MORE: All new car deals available now
MORE: What is novated leasing and how does it work?
