| Tax Warning: GST & Luxury Car Tax |
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Under the GST Act, when buying cars, input tax credits are restricted by the luxury car limit. However, on sale the full GST must be paid.Example:Assume Mr X buys a car for $100,000 and uses it 100% for business purposes. He can only claim an input tax credit (ITC) up to $5,183 being 1/11th of $57,009 (the luxury car limit). Mr X sells the car 2 years later for $77,000 and is required to pay GST of $7,000 being 1/11th of $77,000. Although it appears anomalous that GST should be paid on the full sale price while ITC's (input tax credits) can only be claimed based on the luxury car limit, this is the outcome that the Government clearly intended. In contrast, for income tax purposes, depreciation on a luxury car is limited, but when the car is sold, the sale price is adjusted downwards to ensure tax is not paid on depreciation never claimed (ie the part above the cost limit). Not a lot of consistency here! But the good news is, if in any doubt you can simply contact an Advantage One adviser to help you through the maze. Don Blackwell - Associate, Taxation |
+ 61 8 8333 1944
