Changes to Car Thresholds

As we move into a new financial year, understanding the new car thresholds is crucial for individuals and businesses tasked with managing vehicle-related expenses. By staying informed, you can proactively manage these expenses, maximise tax deductions and ensure compliance with tax regulations. Position yourself for success in the year ahead and read more about these updates below.

From 1 July 2024, the following car threshold amounts will apply: 

Income Tax 

The car limit for the 2024-25 financial year is set at $69,674. This limit represents the maximum value that can be used to calculate the depreciation of a car if the two following conditions are met. 

• The car must be used for business purposes
• The car must be first used or leased during the 2024-25 income year. 

For business owners, this means they can claim a tax deduction for expenses related to motor vehicles used for business purposes. However, if a motor vehicle is used for both business and private purposes, only the portion used for business can be claimed as tax deductible. 

It is important to note that business owners must accurately determine the percentage of business use and maintain records to support their claims. 

Goods and Services Tax (GST)

The maximum GST credit for the 2024-25 financial year is set at $6,334 (1/11 x $69, 674).

If the purchase price of the car exceeds the specified car limit ($69,674), the maximum GST credit that can be claimed is calculated as one-eleventh of the car limit.

It’s important to note that this maximum GST credit applies unless specific circumstances warrant otherwise.

Additionally, while GST credits can typically be claimed for business-related purchases, luxury car tax paid on the purchase of a luxury car is an exception. Even if a luxury car is used for business purposes, GST credits cannot be claimed for the luxury car tax paid on its purchase. 

Luxury Car Tax (LCT) 

For fuel-efficient vehicles, the LCT threshold is set at $91,387. This aligns with the increase in the motor-vehicle purchase subgroup for the Consumer Price Index (CPI). 

For all other luxury vehicles, the threshold is $80,567, aligning with the increase in the ‘All Groups’ CPI. 

The ATO advises caution when purchasing luxury cars, particularly from individuals and entities offering to buy a vehicle from a dealer on behalf of the buyer at a discounted price. The ATO warns that this may be a scheme to evade paying LCT. Buyers could be at risk if the intermediary lacks proper insurance or if the purchased vehicle is damaged or defective. 

At Simmons Livingstone, we’re here to assist you in comprehending these changes and their implications on your financial strategies.

If you have any questions or require more information on the updated car thresholds for the 2024-25 financial year or require assistance in navigating these changes, please contact Simmons Livingstone at 1800 618 800 or via email at admin@simmonslivingstone.com.au.