Home' Border Enterprise : Autumn-Winter 2011 Contents 33
Vol 4. Autumn/Winter
Building for sustainable communities
Partner with us now
• Community housing is an
innovative housing option.
• For any family or individual on a
low to moderate income.
• For those people who cannot
afford a home and who pay
more than 30% of their income
in a private rental property.
• Community housing is managed
by not-for-proﬁt housing
organisations who act as
landlords to provide long term
security of tenure.
• Quality-built homes at an
affordable rental rate.
RURAL HOUSING NETWORK LIMITED
WHEN it comes to income tax,
amounts claimed as business
expenses are less likely to be
challenged by the tax office than
employment related expenses.
One of the reasons for this is that substantiation
rules relating to employment tax deductions are
more detailed and specific.
The substantiation rules applying to claims
for motor vehicle costs against employment
income are tighter than those applying to a claim
by a business. Despite this reduced level of
substantiation business owners must still be able
to demonstrate that there is a link between an
expense and their business activities, and show
the percentage that relates to their business when
there is business and private usage.
Q. I have a business that accounts for GST
using the cash basis. I am considering purchasing
a new vehicle that will have a mix of business and
personal use. I am trying to understand the best
financing arrangement for my company and am
not sure whether hire purchase, chattel mortgage
or a lease is best?
A. As you are on the cash method of accounting
for GST it will not make sense using a Hire
Purchase contract. This is because under a HP
contract the GST included in the purchase price
is claimed over the term of the HP agreement.
This would mean on a vehicle costing $44,000,
with $4000 in GST and using a four year HP
agreement, the claim would be $1000 in a full year
and a part claim in the first and last year.
If instead a chattel mortgage was used to
purchase the vehicle a claim for the GST can be
made in the quarter the vehicle is purchased. If
you used a lease the finance company claims
the GST and they charge GST on each lease
payment. Under a chattel mortgage or HP
agreement no GST is included in the monthly
The amount of GST claimed will be limited to
the business use of the vehicle. If the business
use of the vehicle is 60 per cent, you could claim
this percentage of the GST paid. For the $44,000
vehicle, using a chattel mortgage would result in
a claim of $2400 in the quarter that the vehicle is
Q. I read an article that if a van is a commercial
vehicle the purchaser would be able to claim 100
per cent of the running costs and depreciation
even though the vehicle is used privately 10 per
cent of the time.
My accountant has advised me that although
a commercial vehicle does not come under the
motor vehicle substantiation rules, it would still
be subject to ordinary substantiation and is not
automatically 100 per cent business deductible.
His advice was that it was still best to keep a
log book in case the ATO wished to substantiate
my claim at a later date. Is my accountant wrong?
Would it be different if the private use was 20
per cent, or 30 per cent? Does it matter if I have
another car or not?
A. Your accountant is not wrong as the burden
of proof is still on an owner to justify their business
use where a cost or an asset is used for both
business and private purposes. Where a person
running a business had only one vehicle that was a
commercial van, it would be hard to justify a claim
for 100 per cent. If they had another vehicle they
can however make a case that the private use of
the van is minor and infrequent and they could
claim 100 per cent of the running costs.
Questions on small business tax or other issues
can be emailed to firstname.lastname@example.org
Tax for small business, a survival guide, by Max
Newnham is available in bookstores.
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