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Discretionary Trust & Car Travel Expenses

Discussion in 'General Investing Discussion' started by BigStrawbs, 18th Oct, 2009.

  1. BigStrawbs

    BigStrawbs Member

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    As per my other post, we run our business via a Discretionary Trust with a corporate Trustee. Whilst my wife and I are Directors of the Company, I am also the sole employee. I pay myself a salary of $80K + Super to stay within the 30c tax bracket but the question of how to make maximum benefit of the Trust structure in regards to car travel expenses puzzles me. I understand the travel component of home to my first client and client to home is “personal travel” and therefore not tax claimable as an employee whilst claiming a per K expenses (as part of my employment package) from the Trust would be classified as taxable income and therefore not a great idea (i.e. I would be better distributing this to my wife or kids to ensure ths money stays in the 30c tax bracket).

    So my question is, how do I get the best outcome? Do I pay myself the the 5,000 allowance for travel which the ATO allows tax free (ie Method 1 Cents per K) and then claim the “work related portion” (i.e. client to client) of my travel as an employee? Actually, is this double dipping and not allowed?

    Any assistance would be greatly appreciated.
     
  2. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    How many Kms would you drive each year in total (business + personal) ?

    Have you looked at leasing a car through the business? There are some implications - but I believe in some circumstances it can be reasonably tax effective.

    I don't actually know much about car leasing - hopefully one of our resident accountants can offer some suggestions here.
     
  3. BigStrawbs

    BigStrawbs Member

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    Would be around 20,000 "personal" and 2,000 or so "work related".

    We own both of our Cars, so would look at leasing when we had to change these over.

    Having said that, I would only consider leasing if this gave ME the best outcome in a Trust structure. That is, when I was working for someone else I had a novated lease as that gave ME the best outcome at that time but is this the best way to go with a Trust structure (i.e. I may get a better outcome as a pure employee but this may cost the Trust more money than I could otherwise distribute to the beneficiaries - myself included).
     
  4. ashwright

    ashwright Well-Known Member

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    You could try an Associated Operating Lease. This is where the company finances the car from an assoicated of yours (like your wife or trust), and provides the car to one of its employees (like yourself). You have to pay Fringe Benfits Tax, but depending on the usage, it can work out in your favour.

    See here for an example: What is Fringe Benefits Tax (FBT)? Novated Leases | Novated Lease Calculator | Australia | New Zealand - FleetPlus
    (The differance between a novated lease and an associated lease is who owns the car, in the novated lease the finance company owns the car, in the associated lease your associate owns the car.)
     
  5. BigStrawbs

    BigStrawbs Member

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    Thanks ashwright for taking the time to post that reply.

    My (poorly worded) question was more about what I should be doing now given we own both cars and will not be replacing either for sometime. That is, do I and can I claim the 5,000 (from what I understand is tax free) from the Trust for personal travel as part of my "formal package" and claim the work travel as an employee as part of my private tax return? Cheers.
     
  6. ashwright

    ashwright Well-Known Member

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    Just so that you are aware, for an Associated Lease, in most cases you already own the car outright (there is no need to get a loan for the car). And it does not matter how much is business vs personal if use the Statutory Percentage Rates for FBT.

    I release this is not the question you were asking, but it would be worthwhile running the sums, as it could be better off.
     
  7. BigStrawbs

    BigStrawbs Member

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    The penny has droppped! Thanks for that.