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How Buying a Ute Can Benefit Your Business

Posted by Jane Clothier on 21 October, 2016

 


Fotolia_8138482_XS.jpgThere are many benefits to buying a ute for your business and these extend far beyond the contribution this enduringly popular workhorse can make to generating income.

 

Utes are Highly Tax Deductible

 

The deductions your business receives depend on the business structure. 

  • If it’s a company or trust, you can claim a full deduction on motor expenses connected with a ute the business owns or leases.
  • If either you or other staff use the ute privately, then you may have to pay Fringe Benefits Tax. Good news is that this is also deductible for certain types of ute - see the next section.
  • If your business is run as a sole trader or partnership, you can claim a full deduction for a business-purpose ute, providing private use is only home-to-work travel and other very minor use.
  • If the sole trader or partnership business leases a ute under hire purchase, costs are also tax deductible.

 

Fringe Benefit Tax (FBT) on Utes is Deductible Too

 

Fringe Benefit Tax is applied to benefits given to employees in place of part-salary. There are exemptions in some cases for utes.

  • If the business ute is also used for personal reasons, it is exempt, proving it has a 1 Tonne carrying capacity.
  • If the ute has a carrying capacity of less than 1 tonne – and this includes most dual cab utes – it can still be exempt if it is not designed for the ‘prinicipal purpose of carrying passengers’. The ATO has a formula to work this one out: to be exempt, the total number of seats x 68 must be less than the majority of remaining load capacity (68 indicates 68kg).

 

Utes Depreciate Slowly

 

Depreciation of vehicles for tax purposes can be claimed when used to produce taxable income. This is where the capital cost of the ute as an asset is spread over several years, based on an estimate of its useful life. Depreciation is the ‘decline in value’ allocated to each of the ute’s ‘useful life’ years.

 

The capital cost is usually the purchase price paid for the ute, plus stamp duty, delivery, and initial repairs or improvements. The best part is that if you can find a great value ute at below market cost, the market value may still be used instead.

 

Utes Have Great Resale Value

 

Utes are hugely popular as personal vehicles as well as business, and models that have been on the market for several years continue to hold their value well. Dual purpose twin cabs have enduring appeal with both family and trade buyers, due to their robust capabilities, solid handling and interior space. The manufacturer brands that hold most value are Ford, Mazda, Isuzu, Volkswagen and, of course, Toyota.

 

Depreciation on a new vehicle is usually highest in the first two years, with the value dropping off sharply in years 3 and 4. After that, the decrease is less steep. This makes the ute an extremely good prospect for businesses ready to sell after 4 years, and also for the business buying a lightly used ute.

 

Carsguide.com.au provides the following guidelines for depreciation. Clearly, the rate of depreciation will vary according to kms on the odometer, condition, nature of work the ute has been doing, etc.

 

Years after purchase

Pickup & Cab Chassis 4x2

Pickup & Cab Chassis 4x4

1 year

78.2-81.4%

81.7-82.6%

2 years

72.7-92.5%

74 -78.2%

3 years

63.4-93.1%

64.5-101.9%

4 years

54.9-87.1%

57.9-95.7%

5 years

49.2-77.5% 

54.7-80.9% 

 

Instant Write-Off Scheme

 

There is still time to benefit from the scheme announced in the 2014 Budget, enabling instant write-off on the purchase of utes bought up to a value of $25K, before the end of June 2017. See our earlier article for full details.

 

Ute Finance with 1800Approved

 

1800Approved provides vehicle loans for businesses wishing to invest in a ute, whether you are self-employed, a sub-contractors or apprentice, or sole trader or partnership.  We can help you to locate a sound and reliable commercial vehicle. We will do all the history and mechanical checks, and make sure you are buying a legitimate vehicle from a legitimate seller. This leaves you free to concentrate on your trade and building a bold, bright future for your business.

 

1800Approved is one of Australia’s fastest growing car and asset finance brokers. We specialise in car finance, equipment finance, plus insurance and warranty services, and have previously arranged deals from AU$10k to AU$5m. 1800Approved services clients across Australia, working with over 30 independent lenders to find the best deal.

 

We can also help with sourcing your new and used car warranty, and by sourcing vehicles and equipment through our Drive Wholesale arm. To learn more about how we can help you, call us today on 1800 277 768.

Topics: Tradies