As I power through a string of tax planning meetings with small business owners at this time of year, one thing I can say with confidence is this:
You will NEVER hear me say, “Go buy a luxury car through your company as it will help with your tax.” And there’s a very good reason for that.
Why? Because despite how smooth the finance process might be and how tempting that showroom smell is, buying a fancy car through your company is almost always a bad move when it comes to tax planning.
The FBT Trap
If your company owns the car and you use it privately (even just to drive home or on weekends), the ATO sees that as a benefit to you personally. And the ATO doesn’t care if you use it 90% for business. Unless you have a proper logbook and strict policies in place, don’t be surprised if the ATO starts asking question.
Tax Deductions Don’t Cover the Full Cost
Think you’ll claim the full car as a deduction? Think again. The ATO imposes a car limit (currently $69,674 for 2025 financial year). If your vehicle costs $150k, only part of that is tax deductible. The rest? It sits on your balance sheet with no real tax benefit.
Fast Depreciation Meets Long-Term Debt
Luxury vehicles lose value quickly. Loans don’t. If the business has cash flow pressures later, you may owe more than the car’s worth, and the business ends up wearing a financial burden for a tax benefit that never really arrived.
GST Claim Restrictions
Businesses can only claim GST credits up to the car limit. For luxury vehicles, this means a business won’t be able to recover all the GST paid on the purchase. This can add to the real cost of ownership through the business.
Division 7A Risks
If the car is used by a director or shareholder without proper structuring, the ATO may treat it as a Division 7A loan or a deemed dividend. That’s more tax, more reporting, and more complications you don’t need.
Looks Can Be Misleading
A company driving a prestige vehicle but showing low profit? That catches ATO’s eyes. Inconsistent optics between lifestyle and financials often trigger audits or closer scrutiny.
The Smarter Way?
In many cases, purchasing the car privately and claiming business-use percentages is simpler, cleaner, and more tax-effective. Every case is different, and that’s why structure and strategy matter.