Any business owners looking at purchasing a new car that costs more than $57,466 need to be aware of the taxation implications. Special rules apply for cars with a value exceeding the car limit of $57,466 that limits the amount of GST and depreciation you can claim.
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 that limit. For 2013-14, the maximum GST credit you can claim is $5,224 (that is, 1/11 x $57,466).
The car limit is also applied to the cost you can use to work out the depreciation of motor cars. The maximum value you can use for calculating your depreciation claim is the car limit in the year in which you first used or leased the car. So for the 2013-14 year it will be $57,466. Any cost over and above this limit is disregarded and cannot be depreciated for tax purposes.
To make matters worse, if the vehicle is subject to Fringe Benefits Tax (FBT), the full original cost (including any amount over the luxury limit) is used as the FBT cost base. This can make owning a luxury car in a Company or Trust very undesirable for tax purposes. The FBT cost may outweigh any taxation benefit therefore; calculations need to be done to assess the effectiveness of purchasing a luxury car in a Company or Trust.