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Purchasing a car through a company

Discussion in 'Accounting, Tax & Legal' started by Leandro, 9th Dec, 2005.

  1. Leandro

    Leandro Well-Known Member

    Joined:
    8th Dec, 2005
    Posts:
    228
    Location:
    Sydney
    Hello all,

    I hope this thread is in the right place, as it covers a few differing areas. :confused:

    Firstly i desire to buy a new car, and am trying to achieve the purchase in the most tax effective and cost effective manner.

    A little background to my situation; I have a full time PAYG job and also am the director of a company (Pty Ltd) which i started just under 1 year ago. In this financial year the business will turn a profit. When the financial year ends the profit from the business if flowed through to me will place me in the next tax bracket.

    My thinking of the situation was that if i buy the car through the company (as it will be used legitimately for the business 80% of the time) and utilise it using the log book method i will be able to claim the GST back, and deduct operating expenses and depreciation. Thus reducing my company profit.

    So my first question is, is this a good technique or is there something i am missing or will be a hurdle with this approach? Is anybody doing this here?

    My next question relates to paying for the car which will roughly be around 20K. The company does not yet have enough retained earnings to pay for the car upfront. I however personally do. But my thinking on this issue was that if i can obtain finance for the car at a rate of around 7.2% (Macquarie bank) then effectively i can keep my funds in a investment such as Navra which should return hopefully at minimum 10% and then leverage against that. So even if have to pay tax on the income from my investment i would still be infront due to the better rate and leverage. On top of this i can deduct the interest expense through the company.

    Does my logic make sense, or can anyone see something which i am missing.

    Thats it!! phew!

    Pretty much im throwing this out there as i have been thinking about it for the last few days and wanted to get some different angles from people with investing/accounting mentalities.

    Thanks for reading :)
     
  2. artgul

    artgul Well-Known Member

    Joined:
    16th Aug, 2005
    Posts:
    77
    Location:
    Sydney
    Hi Leandro, pls, check out bellow threat. I think it'll answer your question:

    http://www.invested.com.au/forums/showthread.php?t=329

    Regards,
    artgul
     
  3. Leandro

    Leandro Well-Known Member

    Joined:
    8th Dec, 2005
    Posts:
    228
    Location:
    Sydney
    Thanks artgul.

    I posted a few questions over there, as that thread is on topic of exactly what im trying to do!