When you purchase a vehicle for business purposes, it’s important to understand how GST credits apply. The way you claim depends on how the vehicle is used and its cost.
Vehicles used solely for business
If you use a motor vehicle 100% for business, you are generally entitled to claim the full GST credit included in the purchase price. To do this, you must be registered for GST, hold a valid tax invoice, and report the cost at label G10 (capital purchases) on your activity statement. The GST credit is then claimed at label 1B (GST on purchases).
Vehicles used partly for business
When a vehicle is used for both business and private purposes, you can only claim a partial GST credit. The credit must be based on the percentage of business use, supported by a reasonable method such as a logbook. For example, if your car is 60% business use, you can only claim 60% of the GST credit.
The car limit
Special rules apply if the cost of the car is more than the car limit, which is $69,674 for the 2025–26 financial year. In this case, the maximum GST credit you can claim is $6,334 (one-eleventh of the car limit). Even if you pay more for the car, your GST credit is capped. This limit applies to both fuel-efficient and standard vehicles. Importantly, you cannot claim GST credits on any luxury car tax included in the price.
Other considerations
If you lease a vehicle, you may claim GST credits on lease payments based on business use. For second-hand vehicles purchased from a seller not registered for GST, credits may only apply in limited circumstances.
Understanding these rules ensures you maximise GST credits while staying compliant with ATO requirements.
For more information: https://www.ato.gov.au/businesses-and-organisations/gst-excise-and-indirect-taxes/gst/in-detail/your-industry/motor-vehicle-and-transport/gst-and-motor-vehicles/purchasing-a-motor-vehicle
