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selling company car to my son

Discussion in 'Accounting, Tax & Legal' started by chris_qld, 23rd Aug, 2008.

  1. chris_qld

    chris_qld Active Member

    Joined:
    21st Jan, 2008
    Posts:
    44
    Location:
    brisbane
    I just bought a car under my sole director company's name. i wonder if I can sell it to my son at a very low price (e.g., $ 5,000 for the $20,000 car). Thanks in advance.
     
  2. Rob G.

    Rob G. Well-Known Member

    Joined:
    6th Jun, 2007
    Posts:
    717
    Location:
    Melbourne, VIC
    Do you want to know the Taxation Law issues or Corporations Law issues ?

    Obviously you don't expect any benefits from doing it ?

    Cheers,

    Rob
     
  3. TryHard

    TryHard Well-Known Member

    Joined:
    17th Aug, 2005
    Posts:
    863
    I'm no tax expert but I assume if a transaction like the one you described is scrutinised you'd need a logical explanation needed for disposing of a company asset at less than Fair Market Value, and if its not an arms length transaction you can expect them to (rightly) fine you at least enough to balance the ATO's books, and then maybe the same again to ensure you remember the experience.

    Hopefully you would avoid spending any time in jail, but given there might be a breach of the Corporations Act involved, you might want to start looking as unattractive as you possibly can now, and practising running fast from a standing start on a wet soapy concrete floor :eek: )

    Don't forget also if you are registered for GST that the relevant portion of a vehicle sale price will need to be remitted as GST (I found that out when I sold a previous company vehicle at market value to a licensed motor dealer then realised I had to send the ATO a share :( :( )
     
  4. MattR

    MattR Well-Known Member

    Joined:
    23rd May, 2007
    Posts:
    229
    Location:
    Sydney
    Yes you can do it but you will incur FBT. As your son is an associate of yours, then the company will be liable for the benefit he recieves.

    The benefit is $16,500 (i.e. (20000 - 5000)*1.1) and as its a type I benefit the FBT liable would be $16,500 X Gross Up 2.0647 X FBT rate 46.5% = $15,841
     
  5. Rob G.

    Rob G. Well-Known Member

    Joined:
    6th Jun, 2007
    Posts:
    717
    Location:
    Melbourne, VIC
    What is the purpose of the transfer ?

    Possible FBT for the company if the transfer is in respect of employment.

    Possible balancing adjustment deemed receipt at market value for the company if a depreciable asset.

    Possible deemed dividends to the son (unfranked) if in respect of being a shareholder.

    Possible Corporations Law issues if in breach of fiduciary duties (yes a single shareholder/director can be convicted by ASIC for ripping off their company).

    The purpose is important, as is the company constitution.

    Cheers,

    Rob