Should Your Next Car Be In Your Name Or The Business?

Buying a car in your own name vs the business isn’t just a tax question.

It affects:

1. How much tax you pay (income tax, GST, FBT).
2. How lenders view you for future home and investment loans.
3. What’s at risk if something goes wrong in the business.

This guide walks through the finance, tax and risk trade‑offs so you can make a decision this week that’s defendable to the ATO and sensible to the bank.

Quick answer: when to buy in your name vs the business

For most Australian small business owners:

• Personal name often suits: mostly private use, planning a home loan soon, or wanting to keep the family balance sheet clean.
• Business name / entity often suits: clear majority business use (say 60–70%+), stable profits, and when you want to access GST credits and depreciation in the business.

If you buy in the business:

• You may claim GST and tax deductions, but you’ll usually sign a personal guarantee and the debt will be counted against you at home‑loan time.

If you buy personally and claim a business use percentage:

• You may miss some upfront GST benefits but often retain better borrowing power and a sharper, simpler story for lenders.

For many clients, the best structure is a business-purpose loan with clean records, but with ownership and security kept simple and quarantined from the family home.

How lenders really see cars and utes – not just the ATO

Why this decision matters for your next home or investment loan

Every car loan or lease you take on now will be sitting in the background when you next apply for a home, investment or commercial property loan.

Lenders will:

• Add all repayments (personal and business, if guaranteed) into your serviceability.
• Scrutinise how you pay yourself, your tax returns and existing business facilities.
• Treat many business loans as personal commitments if you’ve signed a guarantee.

This is exactly what we explain for small business owners in Alexandria in /insights/how-lenders-view-alexandria-small-business-home-loan: the bank doesn’t just look at profit, it looks at the whole group – personal, business and trust.

Typical lender treatment of vehicle finance

Most banks and finance companies will categorise things like this:

Because personally guaranteed business debts are commonly treated as personal liabilities, they reduce your borrowing capacity (see also /insights/when-business-trust-personal-borrowing-collide-credit-assessment).

This is why the decision isn’t simply “which option gives more tax back this year?” – it’s “how does this affect my next big loan?”

Tax basics: how cars are treated for business vs personal

1. Income tax deductions

You can only claim deductions for the business use portion of a vehicle.

• Business-owned car (company, trust, sole trader): the business may claim:
  • Depreciation (or temporary full expensing / instant asset write-off if available that year).
  • Interest on finance.
  • Running costs (fuel, rego, insurance, servicing).
• Personally owned car (you as individual): you may claim a business use percentage of costs via:
  • Logbook method (typically best where business use is 20%+).
  • Cents-per-km method (capped at 5,000 business km per year) – simpler but often smaller claims.

Ownership doesn’t change the core rule: no business use, no deduction.

2. GST credits

If you’re registered for GST and buy the car in your business entity:

• You may be able to claim input tax credits for the business portion of the car price and running costs.
• Luxury car limits and specific ATO rules apply, especially for higher-end vehicles.

If you buy personally and are not GST-registered (which is common), you can’t claim GST credits.

3. FBT – the trap for business-owned cars used privately

Where a company or trust provides a car that an employee or director can use privately, fringe benefits tax (FBT) may apply.

• If the car is in the business and you (or family) use it privately, FBT is often triggered.
• You can manage FBT via logbooks and employee contributions, but it adds complexity.
• Certain low-emission vehicles and utes with heavy business use may qualify for FBT concessions – this area moves regularly, so you need up-to-date advice.

If the car is owned personally and not provided by the business as a benefit, there’s generally no FBT – you just apportion running costs for business use.

4. Depreciation limits and logbooks

The ATO caps depreciation for many cars at the car limit (e.g. around the mid‑$60k range, indexed). Anything above that isn’t depreciable under normal rules.

To support deductions you typically need:

• A 12‑week logbook every five years or when use changes materially.
• Odometer readings at the start/end of each year.
• Clear records of running costs and interest.

Whether the car is in your name or the business, poor records destroy tax benefits and raise audit risk.

Finance structures: personal loan, chattel mortgage, lease, novated lease

Core options you’ll usually be offered

For trades and small businesses (our parent topic), the chattel mortgage is still the workhorse: straightforward, you own the asset, interest and depreciation are claimable, and GST credits may be accessible.

But that doesn’t mean the car must be in the company’s name – in some cases, you can structure finance where the security is the car, but ownership is still personal.

Worked examples: tax vs cashflow vs risk

Let’s run through two simplified examples, all in AUD, ignoring state duty nuances and assuming company tax rate of 25% and individual marginal rate of 34.5% (including Medicare). These are illustrative only.

Example 1 – Tradie ute, 80% business use

• Price (incl. GST): $60,000
• Business use: 80%
• Finance: 5‑year term, interest rate 8% p.a. (indicative only)
• GST-registered business.

Option A – Buy in the company via chattel mortgage

• GST credit on purchase (business portion): $60,000 / 11 × 80% ≈ $4,364.
• Depreciation on car limit (assume entire price under limit): claimable at 80% use.
• Interest on loan: let’s say ~ $12,900 total over five years; 80% deductible.
• Running costs (fuel, rego, insurance, servicing): say $12,000 p.a.; 80% deductible.

Cashflow:

• Monthly repayment over 5 years at 8% ≈ $1,217.
• First-year GST credit and deductions reduce tax bill, improving cashflow.

Risks:

• Likely personal guarantee – debt counted in your personal borrowing.
• FBT risk if private use is significant and records are poor.

Option B – Buy personally, claim 80% via logbook

• No GST credit (you personally aren’t registered).
• Depreciation limited to 80% of the car limit; interest and running costs 80% deductible.
• Same 5‑year loan, $1,217 monthly, but the loan is a personal car loan.

Tax impact:

• Deductions now occur in your personal tax return at 34.5%, not in the company at 25%.
  • $10,000 eligible deductions save you ~$3,450 in personal tax vs $2,500 in company tax.

Risks:

• No FBT (it’s your own car).
• The car loan is clearly in your name when banks assess a home loan.

Which is better?

For high business use, the company chattel mortgage often wins if you:

• Need the GST credit now for cashflow.
• Have stable profits.
• Are not chasing a major home or investment loan in the next 12–18 months.

If you are planning a home purchase soon, we’d look harder at total commitments and lender perception of your structure, and often prefer to keep debts clean, quarantined and well-documented.

Example 2 – Family SUV with 30% business use

• Price (incl. GST): $55,000
• Business use: 30%
• Finance: 5‑year term, 8% p.a.

Option A – In the business

• GST credit on business portion: $55,000 / 11 × 30% ≈ $1,500.
• 30% of depreciation, interest and running costs deductible.
• Significant private use – FBT very likely if provided by the company.

Net effect:

• After FBT, compliance and admin, the benefit often shrinks or disappears.

Option B – In your personal name

• No GST credit.
• You keep a 12‑week logbook showing 30% work use.
• Claim 30% of fuel, rego, insurance, servicing and interest in your personal return.
• No FBT.

For many family cars with minor business use, personal ownership is simpler and often more efficient overall.