Should You Buy a Car Through Your Company or Personally? An ATO Guide

• Tax
• Small Business

Deciding whether to purchase a vehicle through your company or personally is one of the most common and critical financial decisions for an Australian business owner. The “best” choice has significant tax and administrative implications, and it hinges entirely on your specific circumstances, particularly your vehicle usage and business structure.

This is general advice based on Australian Taxation Office (ATO) rules. It is not a substitute for professional financial advice. You must consult with your registered tax agent or accountant to model the specific costs for your situation before making a final decision.

The Core Difference: FBT vs. No FBT

The entire decision essentially boils down to one key concept: Fringe Benefits Tax (FBT).

• Company-Owned Car: When a company makes a car it owns available to an employee (including a director) for private use, this is a fringe benefit. The company must pay FBT on the value of this private use.
• Personally-Owned Car: You own the car and claim the business-use portion of your expenses from the company. There is no FBT.

Let’s break down the two options in detail.

Option 1: Buying the Car Through Your Company (Pty Ltd)

When your company buys and owns the car, it’s treated as a company asset. This means the company pays for everything and claims everything, but it also bears the FBT liability.

Pros of Company Ownership

• Claim 100% of Expenses: The company can claim a tax deduction for all running costs, including fuel, insurance, registration, servicing, loan interest, and depreciation.
• Claim GST Credits: The company can claim the GST credit on the purchase price of the car (up to the car limit for depreciation) and on all ongoing running costs.
• Asset on Balance Sheet: The vehicle becomes an asset of the company, which can strengthen its financial position on paper.

Cons of Company Ownership (The FBT Trap)

• Fringe Benefits Tax (FBT): This is the biggest drawback. If the car is available for private use (including being garaged at home), it is subject to FBT. FBT is calculated using either the Statutory Formula Method (a flat 20% of the car’s base value) or the Operating Cost (Logbook) Method (taxing the personal-use percentage of total costs).
• Administrative Burden: The company must handle FBT calculations, lodge a separate FBT return, and potentially make “employee contributions” to offset the liability, adding complexity and cost.

Option 2: Buying the Car Personally

You buy the car in your own name and the company reimburses you for the business-related portion of its use.

Pros of Personal Ownership

• No FBT: This is the single biggest advantage. You completely avoid the tax, complexity, and administrative headache of FBT returns.
• Simplicity: You use one of two straightforward ATO-approved methods to claim expenses: the Cents per Kilometre Method (simple, up to 5,000 business km) or the Logbook Method (claim the business-use percentage of all your actual car expenses).
• Personal Asset: The car is yours. When you sell it, the proceeds are yours personally and generally free of Capital Gains Tax.

Cons of Personal Ownership

• No Upfront GST Claim: As an individual not registered for GST, you cannot claim the GST on the car’s purchase price.
• Partial Deductions Only: You can only claim the business-use percentage of the running costs, not 100%.
• Record Keeping Still Required: The logbook method requires the same diligent record-keeping of expenses and usage as the FBT logbook method.

A Quick Comparison

Feature	Buy Through Company	Buy Personally & Claim
Ownership	Company owns the asset.	You own the asset.
GST on Purchase	Yes, company claims GST credit.	No, you cannot claim GST.
Expense Deductions	Company claims 100% of all costs.	You claim the business-use % of costs.
The Big Tax	Fringe Benefits Tax (FBT) on private use.	No FBT.
Best For…	Very high business use (>90%), or for “workhorse” vehicles that are FBT-exempt.	Low-to-moderate business use, or if you want to avoid FBT complexity.

Special Cases: “Workhorse” Vehicles

The ATO provides an FBT exemption for eligible commercial vehicles like utes and vans not designed principally to carry passengers. If private use of such a vehicle is minor, infrequent, and incidental, it can be fully FBT-exempt, making company ownership highly attractive for these types of vehicles.

Conclusion

The right choice is a numbers game. For most directors with mixed personal and business use, the cost and complexity of FBT often make personal ownership the simpler and more financially sound option. However, for vehicles with extremely high business use or for FBT-exempt “workhorse” utes, company ownership can be more tax-effective.

Always get your accountant to model both scenarios based on the specific car you want to buy and your estimated business-use percentage. This tailored calculation will give you the definitive answer for your business.