selling company car to my son

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.

 

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

 

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 )

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 )

 

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

 

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