Business Guide — Setting up
A guide to buying a car through a businessF5T11T12
Making a business vehicle purchase can deliver real value, if you’ve got a solid plan in place. With the right vehicle and finance option, you could improve your cash flow and streamline the way you work.
3 MINS READWhether you’re a sole trader or small business, starting to grow your fleet or a more established business, you’ll discover some key steps with tailored insights for every stage. And wherever you're headed, our experts are here to help you make confident decisions with your business in mind.
This discussion is high level and does not cover every taxation facet in connection with business vehicles. As such, we recommend you consult with your own independent taxation adviser (registered tax agent) in relation to your business’s own facts and circumstances.
Buying a company vehicle begins by getting the basics right
Personal use or business use
For sole traders that own their ‘cars’,* there are two main ways of claiming vehicle-related expenses in Australia – a logbook or the ‘cents-per-kilometre’ method. For vehicles owned by a sole trader that are not cars, a form of logbook method needs to be applied.
If the business legal entity that owns a vehicle is a company or trust (not a sole trader) and the vehicle is available for the private use of an employee, vehicle expenses should be deductible. But the business will need to consider Fringe Benefits Tax FBT matters. Where a car (or ‘non-car’) is mainly or predominantly used for work purposes as distinct from employee private purposes, logbook method of FBT liability calculation should be considered. FBT compliance for non-cars are usually more complex than that for cars, as statutory formula FBT calculation cannot be applied to non-cars.
Software like Toyota Halo can help you automate the logbooking process to save you time and ensure you accurately account for work-related vehicle use.
*Total designed seating capacity not exceeding eight and less than one tonne total goods and passenger carrying capacity.
Choosing the right vehicle
Your day-to-day needs play a big part in the vehicle you pick. If you’re in a city, a Hybrid Electric like the Toyota Corolla could be a great option. If you’re in construction and trades, a HiLux, HiAce or capable SUV like the LandCruiser Prado might be better suited. Making the right choice from the start should make running your business easier – and set you up for the road ahead. Our team can answer all your questions and get you there with confidence.
Making the most of your tax benefits
Understanding your current business car tax benefits
Buying a vehicle through your business can come with a range of tax benefits – if you meet the criteria. You could access tax depreciation deductions on owned business vehicles, or claim deductions for lease rentals on non-luxury vehicles, which can reduce your overall tax bill.
Take the pooled assets depreciation method, for example. A small business depreciation pool is a way for eligible small businesses to group together (or “pool”) their eligible depreciating assets and claim simplified depreciation deductions on the whole pool. This can save time and boosts deductions earlier on.
In a sole trader context, GST recoveries of the GST content of purchase price, adjusted for private use, need to be considered.
If your business is a company or trust, you’ll need to consider fringe benefits tax if vehicles are made available for private use or used privately by employees (for example, non-work activities like school drop-off, weekend errands and other personal trips). As well as whether a vehicle is garaged at the employee’s residence. Here, it’s important to be really clear on who’ll be using the vehicle, how often and whether this includes personal use. If there is at least 50% business use operating cost (logbook) method should be examined. Keeping an accurate logbook – analogue or digital – will help you stay on top of it all.
Tax strategies based on your business structure
How you claim tax benefits on your vehicle depends on your business setup. Each comes with its own rules, so it’s worth understanding what applies to you. If you’re not sure what the best business structure for car ownership is in your case, chat to your accountant or tax adviser who can help you make the right call.
Strategies for sole traders
If you’re a sole trader, there’s a good chance you’ll be using your vehicle for both business and personal trips. You’ll need to keep a detailed record – like a logbook and running costs that show how much of your driving is for work. You can then claim this percentage back on fuel, servicing, insurance and depreciation or non-luxury lease rentals.
Strategies for partnerships
For partnerships, make sure your vehicle expenses and ownership are clearly split by each owner, and that each person tracks their own usage. This will help you both claim the right share of running costs and tax depreciation.
Strategies for companies and trusts
If you have a company or trust, the vehicle is usually owned or leased by the business – not you personally. That means fringe benefits tax should be considered if the vehicle is made available for private use of an employee.
Keeping track with business vehicle logbooks and records
Good record-keeping isn’t just about staying compliant – it can also help you manage tax time with more confidence, make this process easier and help you get the most out of your claims.
A business logbook is your friend here. To meet ATO requirements, for sole trader business use, partner business use, and companies and trusts using operating cost (logbook) FBT method, you’ll need to log at least 12 continuous weeks. This should include trip details, odometer readings and your reason for each journey. This is important in helping establish what percentage it’s used for business – and what you’re eligible to claim.
You may find an expense tracking app or digital logbook (included with Toyota Halo) will save you time and reduce admin.
Having your car expense record keeping in order also means you’re prepared if you’re ever audited. Keep your receipts, invoices and records consistent, easy to access and clearly labelled.
Finding the Toyota FinanceF5 option that's best for your business
Your business car loan vs lease comparison
When it comes to financing a vehicle for your business, there isn't one right way of doing things and you've got a few options ahead of you. You could pay upfront without external financing, or finance through a loan or lease, each of which has different pros, cons and tax considerations.
Outright purchase from business own cash (no external financing)
There are no repayments, no interest and no finance admin to think about later. While it's a simple, stress-free option if you have the cash on hand, paying in full upfront might impact how flexible you can be with spending elsewhere in your business. Also, there is an implicit cost to self-funding asset acquisitions which should be considered.
Chattel mortgage loan
With a chattel mortgage loan (such as those provided by Toyota Fleet Management TFM division of Toyota Finance Australia Ltd), your business owns the vehicle upfront, but you pay it off over time. Your loan is secured against the car, which can help you get a better interest rate.
Operating lease
If you run a business that has a high turnover of vehicles, an operating lease may be the right solution for you. With an operating lease your chosen finance company will purchase the vehicle on your behalf and then rent it out to you. However, you will not own the car at the end of the lease. Rather, you'll have the option to upgrade your vehicles regularly, especially if you don't want to be stuck with depreciating vehicles that no longer suit your business needs.
With operating leases, you can also add fixed operating costs (like maintenance, registration and roadside assistance and servicing) to the monthly lease payment.
Term Purchase (Hire Purchase)
Another TFM division of Toyota Finance Australia finance contract choice to larger businesses is "term purchase".
Under a term purchase contract, TFM owns the asset but the customer has the legal right to acquire ownership at the end of the finance contract if the customer has met all its financial obligations.
Commercially, it's similar to a chattel mortgage, except the customer does not own the asset until the term purchase agreement has been fully paid down.
Finance Lease
The TFM division of Toyota Finance Australia Ltd also provides finance leases to larger businesses. In a TFM finance lease, a vehicle owned by TFM is leased to a customer for a period of time. Lessees (the lease holders) carry a contractual residual value indemnity obligation which is usually set with reference to ATO safe harbour tables.
While finance lessees do not have a legal right to purchase the asset, lessees have the ability to make an offer to buy the asset and payout the lease and discharge their residual value indemnity obligation at the end of the lease.
During the lease term, lessees will incur finance rents and also can elect to add services to the lease, such as maintenance, CTP and registration renewal, roadside assist and comprehensive insurance.
With a finance lease over a non-luxury vehicle, the lessee does not claim tax depreciation deductions, but deductions for finance rents and services (subject to the lessee's facts and circumstances).
Novated finance lease
TFM Novated (a business unit of Toyota Finance Australia) is a provider of novated finance leases.
Such a novated finance lease is a lease arrangement between your business, your employee and TFM Novated.
A novated car lease allows your employees to drive the make and model car he or she wants, without compromising their lifestyle.
A novated finance lease is a way to finance a car via "salary sacrifice" or salary packaging. In a novated lease the business employer agrees to pay for employee car lease and car running costs during the term of the novation agreement with the employer being compensated out of the employee's salary package through a combination of pre-tax and post-tax salary deductions. In TFM Novated finance leases, contractual residual value indemnity obligations always remain with the employee.
The usual structure of the TFM novated finance lease for cars (other than Battery Electric Vehicles BEVs) is that employee post tax contribution extinguishes FBT taxable (thus no FBT liability). In the case of BEVs , if the BEV qualifies for employer FBT exemption , the employee compensates entirely pre tax (which further enhances packaging attractiveness) , but the employee carries a reportable fringe benefit amount.
Non luxury finances, rents and services are usually deductible. However special income rules apply to novated leases over income tax luxury vehicles.
For employees driving a car fully or predominantly for private purposes, a novated lease will usually result in employee after tax disposable income gains compared with employee private purchase and operation of the same car outside of packaging. For employers, packaging a novated finance lease should be a cost neutral way to enhance employee remuneration.
Novated leasing also simplifies budgeting, as it can consolidate vehicle costs into one regular payment, including running expenses of fuel, servicing, registration and CTP insurance renewals.
Tailoring your finance option to your business size
From your first business vehicle to managing a growing fleet, we offer finance options designed to suit your priorities. While this advice is general in nature, we recommend you consult with your own independent taxation adviser (registered tax agent) in relation to your business' own facts and circumstances.
If you're a sole trader or smaller business, small business vehicle financing options like chattel mortgage mean you don't have to pay the full amount upfront. You could also consider an operating lease, especially if you'd rather keep your cash flow more flexible.
If you have a larger business or enterprise and have vehicles across different sites, then finance leases, operating leases or novated finance leases could help make life simpler.
Calculating the true cost of ownership
When you're choosing a business vehicle, it's easy to only look as far as the price tag. But you really need to plan ahead by considering the business vehicle’s total cost of ownership – that's how well the vehicle will serve your business over time.
Some vehicles hold their value better than others, meaning you'll get more back when it's time to upgrade. You'll also need to factor in day-to-day costs like fuel, servicing, insurance and rego, which can vary depending on how often your vehicle's used.
Our Business Support Team can help you learn more about keeping the true cost of ownership down, or give you a personalised calculation.
Your step-by-step guide to purchasing
Business fleet vehicle selection
Choosing the right vehicle starts with understanding how your business operates – and will operate in the future. Going with the right vehicle or fleet could make your workday smoother, reduce your running costs and support your team as you grow.
Think about how you’ll use it, whether that’s driving around the city, visiting worksites, travelling regionally or making deliveries. This will help you decide whether you need a smaller vehicle, a HiLux, a HiAce or an SUV.
You’ll need to consider numbers too. While you might only need one vehicle now, that could change over time. By planning ahead, you can avoid outgrowing your setup too quickly. That way, you’ll make smart decisions that work hard for your business, whatever the future has in store.
Speak to our experts to get the best value for your business
Every business is different, so we’re on hand to help you land on a solution that actually works. If you’re buying a car through a business ABN, great news – you might be eligible for business pricing. Chat to our dedicated team about ABN car deals to see what we can unlock for you.
Thinking bigger? If you’re buying more than one vehicle or looking to grow your fleet, we can get you there too. You may be eligible for business fleet discount thresholds, so we’ll guide you to making the most of them.
Securing the documents that make it official
Once you’ve chosen your vehicle and agreed on a deal, there’s just a bit of paperwork to take care of before you hit the road.
The business vehicle purchase paperwork you’ll need will depend on your setup. If you’re a sole trader, that’s usually an ABN and your proof of identity. If you run a company or trust, you’ll likely need extra documentation like business registration details or proof of directorship.
And don’t forget insurance – it’s one of those things you hope you’ll never need, but will be glad it’s there if you do. Whether you’re adding the vehicle to an existing policy or starting fresh, check your cover lines up with how the vehicle will actually be used in your business.
Finding the vehicle that works for your business
Service-based businesses
Whether your business is in plumbing or electrical, pest control or tech repairs, you're running solo or managing a growing team, you'll know the impact a vehicle will have on your day. It's more than a way to get from A to B – it's a mobile workplace, a storage system and your brand on wheels.
When it comes to service business vehicle selection, look for a reliable, spacious vehicle like the HiLux and HiAce that can handle your gear, adapt to your schedule and help you show up looking professional.
Construction and trades
Construction business vehicles do more than just get you to a site – they're part of the job. From hauling heavy loads to keeping your tools secure, they have to be built to handle hard work without breaking a sweat.
The HiLux and LandCruiser70 are solid favourites for just those reasons, with plenty of towing power, flexible storage options and the durability to take on rugged conditions. That includes the clearance, grip and durability to get in and out of any worksite. Whether you need a single cab for solo site runs or a dual cab with room for extra hands, we've got a setup that works for your trade.
Sales and professional services
When your work involves meeting clients or making a strong first impression, your vehicle becomes part of your brand. It's the first thing people see when you pull up – and it says a lot before you even step out.
Professional services company cars typically prioritise comfort, reliability and presentation. Whether you're transporting clients or travelling between meetings, an SUV or a Hybrid Electric sedan can be an efficient and sharp option that'll also keep running costs down. Plus, they come with the tech and safety smarts to help keep you connected and protected wherever the workday takes you.
Power your business with Toyota For Business
Whether you're operating a single vehicle or a full fleet, Toyota business cars and commercial vehicles have the range and reliability to keep your business moving. From compact and efficient, to tough and ready for work, there's a Toyota built to suit your business.
We also offer capped price servicing through our Toyota Service Advantage, so there's no surprises when it comes to maintenance costs. Plus, as a business customer, you'll get access to programs designed for you in mind, along with the peace of mind that comes with Toyota's reputation for quality and resale value.
Chat to our team about exploring our latest offers and discover fleet solutions that fit your business needs.
Turn planning into action with support from our team
From buying your first vehicle to commanding a full fleet, buying a car through your business can deliver serious value. And with the right structure, planning and support from us here at Toyota, the process can be a lot more straightforward than you might think.
No matter the size of your business, our team is ready to help you make smart, informed decisions to hit your structure and goals.
Importance of customers obtaining their own independent financial and taxation advice: This is a high level and general discussion and does not cover all tax matters that may need to be considered and the specific facts and circumstances of a customer. We recommend customers obtain their own independent taxation (from a registered tax agent) and financial advice.
