You own the company.
The company owns the car.
So if you want to move that car into your personal name, surely you can just head down to Service NSW, transfer the rego, and you’re done?
Not quite.
One of the most important things to remember when operating through a company is that you and your company are two separate entities.
The company’s money isn’t automatically your money.
And the company’s assets aren’t automatically your personal assets either.
So when a motor vehicle moves from your company to you, a director, shareholder or another related party, there can be a number of tax and financial consequences to consider.
▶ I break down the entire process and the potential costs on both sides.
First: What’s the Car Actually Worth?
Before doing anything, you need to establish an appropriate market value for the vehicle.
This isn’t a matter of picking a number that gives you the best tax outcome.
Because you’re dealing with related parties, you generally want to be able to demonstrate that the transaction has been handled appropriately and substantiate the value you’ve used.
An online vehicle valuation may provide a starting point, but depending on the circumstances, you may want stronger evidence of market value.
In my example, the vehicle has an assumed market value of $24,200.
What Happens to the Company?
This is where things become more interesting.
In the example I use in the video, the vehicle had previously been depreciated down to a written-down value of zero.
That doesn’t mean the company can simply give it away.
If the vehicle is disposed of for $24,200, there can be tax consequences for the company.
If GST applies to the sale, GST also needs to be considered and potentially reported through the company’s BAS.
There may also be an assessable amount arising from the disposal for income tax purposes.
The exact treatment depends on the circumstances, which is why you want your accountant involved before the transfer happens.
What Happens to the Person Getting the Car?
Now we need to look at the other side of the transaction.
The company has transferred the car – but someone has acquired it.
That could be a director, shareholder, family member or another related party.
There may be transfer costs to consider, including applicable stamp duty.
But there’s an even bigger question:
How are you actually paying the company for the vehicle?
If you have the cash available and genuinely pay the company the agreed amount, that’s one scenario.
But what if you don’t?
That’s where things can become considerably more complicated.
And Then There’s Division 7A…
If you’re a shareholder or associate and effectively owe money to your private company as a result of the transaction, Division 7A may need to be considered.
This is where business owners can get themselves into trouble because it’s easy to think:
“It’s my company. What’s the problem?”
But again, you and your company are separate.
Division 7A contains rules governing certain payments, loans, and benefits provided by private companies to shareholders and their associates.
Depending on how the transaction is structured, there may be requirements regarding loan agreements, benchmark interest rates, and minimum annual repayments.
That means transferring the car without actually paying the company could potentially turn what looked like a straightforward transaction into a financial arrangement lasting several years.
So What Does the Car REALLY Cost You?
This is where looking at the complete transaction becomes important.
It’s easy to focus on one number:
The value of the car.
But depending on your circumstances, there could also be:
- GST consequences
- Company income tax consequences
- Stamp duty and transfer costs
- Division 7A considerations
- Interest over the life of a complying loan
- Minimum yearly repayments
- Tax consequences associated with interest received by the company
There may also be different tax outcomes for the person acquiring the vehicle depending on how it is subsequently used.
The important thing is that you look at both sides of the transaction before deciding whether transferring the vehicle makes sense.
Don’t Transfer First and Ask Questions Later
This is probably the biggest takeaway.
If you’re considering:
- Closing a company that owns a vehicle
- Replacing a company vehicle
- Moving an existing vehicle into your personal name
- Transferring a vehicle to a director or shareholder
- Transferring a vehicle to another related party
Speak to your accountant before you do it.
We’d much rather sit down with you beforehand, work through the numbers and understand the consequences than have you come to us afterwards and say:
“I’ve already transferred the car. What do we do now?”
That’s the whole point of good accounting advice.
Questions are cheap. Mistakes are expensive.
If you’re thinking about transferring a company-owned vehicle, get in touch with the NGR Accounting team before making the move.
We actually give a shit about helping you make the right decision before it costs you.
Get in touch with the team at NGR Accounting before lodging your tax return to make sure you’re claiming everything you’re entitled to—and nothing that could create problems later.
Need help navigating the new financial year?
👉 https://ngraccounting.com.au/contact-us/