Small business owners are set to benefit from the expected return of some tax perks for company cars.
Under current rules, if a company car is also available for personal use, it is subject to fringe benefits tax.
This tax, introduced in 1985, operates on the assumption that all use is personal and so has been seen as an expensive option.
According to Mike Shaw, director at tax advisory firm OliverShaw, the new regulations would significantly benefit small and medium-sized businesses where the owner's car might be used for work and personal use.
``While the halcyon days of tax-free company cars is not returning, [the] law change to take effect from April 1, 2017 will reintroduce some tax perks for company cars,'' Mr Shaw said.
``For SMEs, there are real benefits in having all private use motor vehicles owned by the business.''
He said the move was a valuable tax concession but it would be limited - largely confined to those that owned the company they were employed by, rather than for an average employee.
The Bill was going through parliament, Mr Shaw said, and was expected to be enacted when parliament resumes this year. The changes would provide a system similar to that of non-corporate taxpayers that had vehicles for a mixture of business and private use.
``Basically the application of a log book will determine the deductible portion of the expenditure and no fringe benefits tax will be payable by these closely held companies,'' he said.
``If there is no log book, most of the expenditure will be non-deductible.''
According to Mr Shaw, even when the vehicles were not used for business purposes there were other benefits of being commercially owned.
For example, if interest costs were not related to the purchase then all interest remained tax deductible by the company.
In many situations, interest costs could be structured so they were not related to the acquisition, meaning all interest was tax deductible.
This resulted in what was effectively an interest deduction for private borrowing.
The other benefit came from private use not being a deemed dividend, he said.
``Effectively this means that for the non-deductible portion of the operating costs, they will be funded by the company, which has a tax rate of 28%, whereas if it were funded by the employee or treated as a deemed dividend, then it would be funded from tax paid profits at 33%.''
On top of this, a percentage of the running costs would also become tax deductible should a log book be maintained.
The new rules only apply to new motor vehicles purchased after the start of the 2017/18 income year or when the vehicle was first used for business purposes.
