Should You Buy a Car Through Your Company or Personally?

• Tax
• Small Business

For an Australian company owner, buying a car through the company is not automatically better than buying it personally. A company car can give cleaner business records and possible GST credits, but private use can create Fringe Benefits Tax (FBT), extra records and year-end work. A personally owned car can be simpler, but deductions and GST credits usually depend on the business-use portion.

The right answer depends less on who signs the purchase contract and more on private use, logbook evidence, GST registration, FBT exposure and how the vehicle will appear in the accounts.

Quick answer

If the company owns or leases the car and a director, employee or associate can use it privately, the company needs to consider FBT. The ATO’s guidance on how FBT applies to cars explains that a car fringe benefit can arise when a car is used privately or is available for private use.

Personal ownership is often simpler for mixed-use cars because the owner can claim only the business-use portion, usually supported by a logbook or cents-per-kilometre method where allowed. Company ownership may suit high business use, pooled work vehicles, eligible commercial vehicles, or cases where the company wants the asset, finance and running costs in one place.

This is general information for Australian small businesses, not tax advice. Ask your accountant to model both options before buying the car, especially if the vehicle is expensive, garaged at home, partly private, leased, electric, or used by a director.

Key points

• Company ownership can make the car an asset in the company books, but private use can trigger FBT.
• Personal ownership avoids company-car FBT, but only the business-use portion is usually claimable.
• GST credits and depreciation can be capped by the car limit for passenger vehicles.
• A logbook, odometer readings, invoices and reimbursement records are often more important than the purchase structure.
• Do not use a director loan account, drawings account or reimbursement entry to hide private car use.

Company car versus personally owned car

Option 1: Buying the car through your company

When a Pty Ltd company buys the car, the vehicle belongs to the company. The company usually pays the finance, registration, insurance, fuel, servicing and repairs. The car may appear on the balance sheet, and depreciation can affect taxable income over time.

That can be neat when the car is genuinely a business asset. It can also be expensive if the car is regularly used privately.

What to check

• Is the car used privately, garaged at home, or available to a director or employee outside work?
• Is the vehicle an ordinary passenger car, an eligible commercial vehicle, or an electric car with a possible FBT exemption?
• Will the company use the statutory formula method or operating cost method for FBT?
• Does the business have enough logbook, odometer and cost records to support the method?
• Will the GST credit or depreciation claim be affected by the car limit?

The ATO’s small-business car-threshold update says the 2025-26 car limit is $69,674 and the maximum GST credit for a car above that limit is usually $6,334, unless an exception applies. Those limits matter before a company assumes it can claim GST or depreciation on the full purchase price.

Option 2: Buying the car personally

When you buy the car personally, the car stays outside the company balance sheet. The business claim is usually limited to the business-use portion, either through your own tax records or through a company reimbursement process if you are an employee or director.

Personal ownership is often easier when the car is used heavily outside work. It can also avoid company-car FBT, because the company is not providing a car fringe benefit. The trade-off is that you need clear business-use evidence and you usually cannot treat every vehicle cost as a company expense.

If the company reimburses you for business travel or running costs, keep the reimbursement separate from personal spending and owner transfers. Gimbla’s guide to recording personal expenses explains why company expenses, personal expenses and director loan balances should not be mixed.

Common traps

Assuming the company can claim everything

Company ownership does not automatically mean 100% deductibility. If there is private use, the tax treatment can change through FBT, employee contributions, apportionment or adviser adjustments.

Forgetting the car limit

Passenger vehicle depreciation and GST credits can be capped even when the company pays more for the car. Check the current ATO threshold before relying on a purchase quote or finance schedule.

Treating private car costs as director loans

A director loan account may help when company money is used privately, but it does not make private use disappear. If the company provides the car, review FBT separately.

Ignoring fuel and operating records

Fuel, tolls, repairs, insurance and registration should be easy to trace. If the business also claims fuel tax credits, check eligibility carefully because light vehicles used on public roads are commonly excluded. See the Gimbla guide to fuel tax credits before assuming fuel costs create a credit.

Accounting workflow in Gimbla

Before buying the car, decide how the records should work:

1. decide whether the buyer is the company or the individual
2. set up the correct asset, loan, expense or reimbursement accounts in the chart of accounts
3. keep purchase documents, finance contracts, tax invoices and registration records
4. decide how vehicle depreciation should be tracked in the fixed asset depreciation workflow
5. consider how the purchase or sale will affect cash flow from investing activities
6. record running costs consistently from the bank feed
7. keep logbook, odometer and private-use evidence outside the bank memo alone
8. review the profit and loss, balance sheet and tax accounts before year end
9. ask your accountant to check FBT, GST, depreciation and reimbursement treatment before lodgment

This is a bookkeeping decision as much as a tax decision. The cleaner the transaction trail, the easier it is to compare options, explain the business-use percentage and avoid messy reclassification later.

FAQs

Is it better to buy a car through a company or personally?

It depends on business use, private use, GST registration, FBT exposure, finance, records and your tax position. Company ownership can help when business use is high, but private use can trigger FBT.

Does a company car always create FBT?

Not always, but FBT is a major risk when a company car is used privately or available for private use. Eligible work vehicles and some electric cars may have exemptions, but the conditions need careful checking.

Can a company claim GST on a car?

A GST-registered company may be able to claim GST credits for the business-use portion of a car, but car limits and luxury car tax rules can cap the claim. Check the current ATO threshold before buying.

In short

If the car is mostly private, personal ownership is often cleaner. If the car is a genuine work asset, company ownership may still make sense, but only after modelling FBT, GST credits, depreciation, finance and record keeping. Do the comparison before signing the contract, not after the first BAS or FBT return is due.