Income Tax Assessment Act 1997

CHAPTER 2 - LIABILITY RULES OF GENERAL APPLICATION  

PART 2-42 - PERSONAL SERVICES INCOME  

Division 86 - Alienation of personal services income  

Subdivision 86-B - Entitlement to deductions  

SECTION 86-70   Car expenses  

Cars used solely for business

86-70(1)    
Section 86-60 does not stop a *personal services entity deducting a *car expense for a *car of which there is no *private use.

Other cars

86-70(2)    
Section 86-60 does not stop a *personal services entity deducting:

(a) a *car expense; or

(b) an amount of tax payable under the Fringe Benefits Tax Assessment Act 1986 for a *car fringe benefit;

for a *car of which there is *private use. However, there cannot be, at the same time, more than one car for which such deductions can arise in relation to gaining or producing the same individual's *personal services income.

86-70(3)    
If there is more than one *car to which subsection (2) could apply at the same time, the entity must choose the car to which subsection (2) applies at that time. The choice remains in effect until the entity ceases to *hold that car.

Example:

Continuing example 2 in section 86-20 : Assume that NewIT provides 3 cars to Ron. Car 1 is used solely for business purposes and cars 2 and 3 are used for private purposes.

NewIT can deduct all the car expenses it incurs for car 1. It can also deduct all the car expenses it incurs for its choice of either car 2 or car 3, as well as the fringe benefits tax it pays for that car. However, it cannot deduct any car expenses or fringe benefits tax for the car that it does not choose.

Note:

If car expenses for a car are not deductible because of section 86-60 , the car benefit being provided is an exempt benefit for the purposes of fringe benefits tax: see subsection 8(4) of the Fringe Benefits Tax Assessment Act 1986 .