The EOFY guide for buying cars for your legal business

24 June 2022 Promoted by Savvy

The end of the financial year (EOFY) is the best time to focus on the business rather than what you’re doing in the business – and solo practitioners to large corporate firms may wonder if they can purchase cars they may need to get to meetings and court hearings, while also taking advantage of incentives by making pre-tax purchases.

Though we’ve discussed cash flow facilities and credit to help forecast for the financial year ahead, you can take advantage of tax breaks and other write-offs to help purchase vehicles for your business. 

Looking at chattel mortgages

The most common asset finance for business is known as a chattel mortgage. A chattel mortgage works much in the same way a commercial loan does – you pay back the loan in instalments until it’s paid off. (A hire purchase works the same way – although you don’t take ownership until the end of the loan term.) 

Chattel mortgages are a cash flow neutral solution to other types of loans, as your business can borrow more than the purchase price of the vehicle to facilitate registration, insurance, and other on road costs you would otherwise incur out of pocket. Chattel mortgages can also run between 12 months to seven years and beyond (if applicable) and a business can reduce regular repayments by opting for a residual value (balloon) payment, a percentage of the loan due as a lump sum at the end of the term.

Tax advantages to chattel mortgages

Chattel mortgages are business car loans and are structured as such. Chattel mortgage holders can claim a raft of tax benefits including the GST paid on the vehicle; interest paid; and depreciation up to the depreciation limit. Your business may be able to use the simplified depreciation rules (such as temporary full expensing) if your firm has an aggregated turnover of less than $10 million.

Your business may also qualify for the instant asset write-off, while it’s still applicable. You can also claim business motor vehicle expenses using a logbook method or the cents per kilometre method. If you are unsure about all the tax deductions you can claim as part of motor vehicle expenses, click here to read the ATO’s latest fact sheet.

Incentivising associates: novated leases

Though times may be tight, and wage increases harder to come by, you can incentivise associates by providing them with a novated lease car. A novated lease is a three-way agreement between your firm, a lender, and an associate to acquire a car through a lease agreement. The upside for your associate is that the lease payments are taken out of their pre-tax salary, which bumps them into a lower taxable income bracket. The car itself may also be cheaper than buying on the open market as you can access fleet discounts. 

Before the EOFY ends, see if financing a car using these methods are beneficial for your firm. Consult an accountant before making any major decision.

 

 

The EOFY guide for buying cars for your legal business
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Savvy Car Finance offers low interest car loans and finance options in Australia. 
Savvy Car Finance offers low interest car loans and finance options in Australia.