Car in LAQC

[ActionMan]

I was today contemplating buying a car into my LAQC.

Its Saturday so my Accountant is out Fishing .

As anyone done this?

[spaceman]

Makes sense to me

I haven't ....but I would if I was in NZ.

If the LAQC owns the car it can claim depreciation on it, etc etc

You have to be carefull about the rules regarding FBT though.

You could still of course claim against the car if it was in your own name .. for the proprtion of it that is business related.

One of the "SECRETS" of the rich is proported to be "own nothing, control everything" ....not owning the car personally follows his train of thought.

Cheers
Spaceman

[RentMaster]

I asked my accountant about this a while ago, and he basically told me not to do it. He said the Fringe Benefit Tax would be very high. I dont know all the details of FBT, but I think if the car is primarily going to be used for private use, then the FBT will be higher. I think it only becomes viable is the car is used primarily for business purposes. Maybe it depends on the individual circumstances.

[roseneath_rat]

You'd be able to deduct interest costs, depreciation & running costs.

However Fringe Benefit Tax on cars is very high, last I looked it was 6% of the cost price per quarter, that equates to 24% of the vehicle's price per year, and it doesn't reduce in subsequent years. Chances are the majority of your vehicle use will be 'personal' rather than business purposes.

IRD take a close look at any structure that enables tax advantages for what are essentially personal vehicles, including closing the loopholes on 1x1x1 leases, and 9-5 leases.

[tjthorne]

The FBT rates changed from 1 April 06. They are now 20% of the cost price of the vehicle (down from 24%) or 36% of the diminished value of the vehicle. I find that whether your vehicle should be owned by a company is larger dependent on how much the vehicle is worth seeing as that is the sole driver for the amount of FBT you pay.

[roseneath_rat]

Thanks for clarifying the FBT rate change TJ.

[CJ]

The iddea is to get around FBT - so you will proably need a personal car.

Who is the guy who use to post here who has his porsche, ferrari and Lamborgini in his company (why has he stopped posting - is he writting another book?)

[captaincrab]

You can avoid FBT if the car is "not" available for personal use but only during business hours for business purposes, your Registered office is at your home where it is parked at night, and you can prove you have another car for your personal use. Our families second car is in joint names for that reason.

[CJ]

The problem with FBT is that I think that for a normal car, there is a presumption it will be used for personal purposes.

To get around this presumption is an issue including signwriting on teh car (that cant be removed so no magnets etc). When you discuss with the accountant, they should be able to say what needs to be done but is isn't as simple as say "I dont use it for personal".

[xris]

Is it too simple to use a log book and then say 65% business and 35% personal, and then claim 65% only? Or would the IRD frown on this?

xris

[CJ]

If the car is owned by the company, every day it is avaliable for private use (whether used or note) it is a FBTable event. There are exemptions etc but this is the general rule.

The log book think is more when it is in your name and you claim expenses from the company.

[Micky]

I have a car in our LAQC and pay FBT each year. This can be worthwhile if the car is of a lower cost as you are only paying (as stated in a previous post) now 20% of the cost price of the car. Paying FBT each each effectively "buys" you the right to claim all the running costs of the car including fuel. A rough guide to working out whether buying the car in the LAQC and paying FBT would be worthwhile is to add up all your running costs per annum. Include things such as fuel, insurance, WOF, Rego, & routine maintenance and if this is above 3 times (using 33% tax rate) what you would be paying in FBT then it may be worth considering. In my case I should of done my calculations first as I would have been better of just claiming for all business km that I drive using a log book as I have done previously.

A short example would be $50 fuel per week = $2600 + $200 rego + $60 WOF + $350 insurance + $200 maintenance = $3410 worth of expenses per year.
Divide that by 3 if on a tax rate of 33% to get the maximum FBT that you should pay before it does not become viable, in this case $1136. If we now muliply that by 5 (since our FBT of $1136 is 20% of the cars cost) we get a value of $5680. Therefore if we purchase a car for for more than this amount in our LAQC using our expenses above then it would not be a wise move, however for a car cheaper than this it may be worthwhile.

For me personally, next time around I will be purchasing the car in my own name and using a log book claiming on the milage that I drive for business purposes. This means I can own a good quality car (not sure if you can get a good car for around 5k) and still claim expenses and come out on top. (not the case at the moment).

Disclaimer. - This is my understanding.

[captaincrab]

I thought FBT was charged at 6% pa of the cars purchase price? I think they are changing it so the following year you are assessed on the depreciated value but usually the assessment remains over the years based on your original PP.
My system works well and has passed scutiny over the last three years. I dont pay FBT but can still offset all costs and depreciation against my income. nice.

[NZGEMS]

Have you thought of owning the car yourself and just charging your company a lease to use it?

As others have said it does depend on the value of your car too, I put my new secondhand car in the trust when I bought it a few months ago but mine is solely for business, you get around it that way but as others have mentioned if you dont have a second car you own personally or your wife does you cant do it. My husband has a car in his name so we were able to do it.

It is good being able to claim all your expenses too on it. plus you claim the GST back.

[Perry]

Who is the guy who use to post here who has his porsche, ferrari and Lamborgini in his company (why has he stopped posting - is he writting another book?)

That would be Orion. He's had some significant changes in
circumstances, so he's probably rather distracted from PT,
for the time being.