“Can my small business buy a car?” is one of the most common questions we hear at tax planning meetings — usually followed by “and how much tax will it save me?” The short answer is yes, your business can buy a car. The longer and more useful answer is that whether it should depends on your business structure, how much you will genuinely use the car for business, whether you are registered for GST, and whether you understand the fringe benefits tax (FBT) trap that catches company owners every year. Buy the right way and the tax savings are real. Buy the wrong way and you can end up worse off than buying the car personally.

This guide from Trinity Accounting Practice is the decision framework: who can buy, what you can actually claim, how the financing choices compare, and a worked example showing what the business purchase genuinely saves at a typical income level.

Yes, but — your business structure changes the answer

Any business can pay for a car, but the tax treatment depends heavily on the entity that owns it:

Sole trader. There is no separate legal entity — you and the business are the same taxpayer. You buy the car in your own name and claim the business-use percentage of running costs and depreciation. No FBT applies, because you cannot provide a fringe benefit to yourself. This is usually the simplest path.
Partnership. Similar to a sole trader — partners claim the business-use percentage of car expenses against partnership or personal income. No FBT for partners using their own cars.
Company. The company can buy the car outright and claim 100% of the costs as a business expense — but the moment a director or employee uses that car privately (and driving it home counts as private use), FBT generally applies. FBT is charged at 47% of the grossed-up taxable value, which can wipe out the deduction benefit entirely if it is not planned for.
Trust. Broadly similar to a company where the trust employs people — private use of a trust-owned car by an employee or director can trigger FBT.

The pattern we see most often: a company owner assumes “the business buys it, the business deducts it, done.” The FBT consequences arrive 12 months later. For the detail on structuring the purchase itself, see our companion guide on buying a car through your business.

The business-use percentage is everything

You can only claim the proportion of car costs that relates to genuine business use. Travel between home and your regular workplace is private, not business — that surprises a lot of people. Business use generally means travel between work sites, visiting clients or suppliers, picking up stock, and similar journeys.

For sole traders and partnerships, two methods apply:

Cents per kilometre — 88 cents per business kilometre in 2025–26, capped at 5,000 km per year (a maximum claim of $4,400). Simple, no receipts for running costs, but no separate depreciation claim.
Logbook method — keep a logbook for a continuous 12-week period to establish your business-use percentage, then claim that percentage of all car costs: fuel, insurance, registration, servicing, interest on finance and depreciation. The logbook is generally valid for five years if your usage pattern stays consistent.

If your genuine business use is 20%, claiming 80% or 100% is not optimism — it is the kind of claim the ATO’s data-matching program is specifically built to find. The ATO publishes detailed guidance on motor vehicle deductions.

GST credits — only if you are registered, and only up to the cap

If your business is registered for GST and buys the car for business use, you can generally claim back the GST included in the purchase price — but two limits apply:

The credit is reduced by your private-use percentage. 70% business use means 70% of the available GST credit.
The car limit caps the claim. For 2025–26 the car limit is $69,674, which caps the maximum GST credit at $6,334 (one-eleventh of the limit) — even if the car costs $120,000.

Not registered for GST? Then there is no GST credit at all — the GST simply forms part of the car’s cost. For businesses under the $75,000 GST registration threshold, this alone can change the maths on whether buying through the business is worthwhile.

How should the business pay for it? Chattel mortgage vs lease vs cash

Outright purchase. The business owns the car from day one, claims depreciation (subject to the car limit) and the GST credit upfront. Best when cash flow allows.
Chattel mortgage. The most common option for SMEs. The business owns the car (the lender holds a mortgage over it), so it claims depreciation plus the interest component of repayments, and — if registered on a cash or accruals basis — generally the full GST credit upfront. Repayments themselves are not deductible; the deduction comes through depreciation and interest.
Finance lease / operating lease. The financier owns the car; the business claims the lease payments (apportioned for business use). No depreciation claim, and special rules apply for cars above the car limit. Novated leases are a different arrangement again — an employee salary-packaging structure rather than a business purchase.

Which is better depends on your cash flow, GST registration and how long you will keep the car. This is one of the questions where ten minutes with your accountant before signing finance documents routinely saves thousands.

Worked example — buying personally vs through the business

Maria runs a Beverly Hills consulting company and earns $150,000, putting her in the 37% bracket (39% with Medicare levy). She wants a $55,000 (GST-inclusive) car she will use 70% for business, confirmed by a 12-week logbook. The company is registered for GST.

Buying personally: Maria claims cents per kilometre — at best 5,000 km × 88c = $4,400 deduction, worth about $1,716 in tax saved per year. No GST credit.

Buying through the company (chattel mortgage): the company claims a GST credit of $5,000 × 70% = $3,500 upfront. The remaining cost (about $51,500) is depreciated — at 70% business use through the small business pool, the first-year depreciation deduction is roughly $5,400 (15% first-year pool rate × 70%), rising to roughly $9,700 in year two (30%), plus 70% of fuel, insurance, registration, servicing and finance interest — easily another $5,000–$7,000 of deductions a year. At the 25% company tax rate, year-one tax savings are in the order of $2,600–$3,100, plus the $3,500 GST credit in cash.

The catch: Maria’s 30% private use of a company car is a fringe benefit. Under the FBT statutory formula, the taxable value would be 20% of the car’s base value — roughly $10,000 — with FBT payable around $9,700 a year unless she uses the operating-cost method with her logbook, or makes employee contributions to reduce the taxable value to nil. With the logbook and a properly structured employee contribution for the private portion, the FBT can be managed down dramatically. Without planning, the FBT bill alone could exceed every dollar of tax saved.

The honest summary: through the business, Maria is genuinely ahead — but only because her business use is high, she is GST-registered, she kept the logbook, and the FBT position was structured before the purchase. Change any one of those and the answer can flip.

A Trinity insight from 22 years in practice

In 22 years we have rarely seen a client lose money buying a car through a business when they asked the question before the purchase. We have seen plenty lose money asking it after. The dealer’s finance manager will happily write “business purchase” on the contract in March; the FBT return arrives the following May. Our rule of thumb at Trinity: if your genuine business use is below about 50%, you are not registered for GST, or you cannot commit to a logbook, buying personally and claiming cents per kilometre is often the better and safer outcome. The car deduction should never be the reason you buy the car — it should be the bonus on a purchase you needed anyway.

What this means for you

If you are a sole trader with high business kilometres: the logbook method on a personally-owned car may give you most of the benefit with none of the FBT risk.
If your company is about to buy a car you will drive home each night: get the FBT position modelled before you sign — not after.
If you are not registered for GST: factor in that you get no GST credit; the business-purchase advantage shrinks considerably.
If the car costs more than $69,674: your depreciation and GST credit are capped at the car limit regardless of price.
If you have never kept a logbook: start a 12-week logbook now — it is the key that unlocks the better claim methods.
If a dealer is pushing a particular finance product: compare chattel mortgage, lease and cash with your accountant first.

How Trinity can help

Trinity Accounting Practice runs the buy-or-not analysis for clients before every significant vehicle purchase: entity choice, business-use percentage, GST credit, depreciation method, finance structure and the FBT exposure, all modelled on your actual numbers. As Certified Xero Advisors we also set up the logbook and expense tracking so the claim survives ATO review. And through Nexus Wealth Partners we can compare vehicle finance options alongside the tax analysis.

Ask Trinity whether your business should buy that car →

General advice only. This article contains general information current as at June 2026 and does not constitute tax, financial or legal advice. It does not take into account your personal circumstances, objectives or needs. Before acting on any information in this article, you should consider its appropriateness to your situation and seek professional advice from Trinity Accounting Practice or another qualified adviser. Liability limited by a scheme approved under Professional Standards Legislation.