Charities & Motor Vehicle Trade-Ins
10 January 2005 at 12:01 pm
The Australian Tax office has issued a Fact Sheet that explains the goods and services tax (GST) treatment of motor vehicles a Not for Profit uses as a trade-in to purchase another vehicle.
If you trade-in your vehicle, you are making a taxable sale and the trade-in price is the amount you receive for the sale. You must show the trade-in price on your activity statement, even if you purchased the vehicle prior to the introduction of the GST.
There are Non-commercial rules affecting motor vehicle trade-ins by a charity.
If you are registered for GST and you use the vehicle solely or partly in your enterprise, the sale may be GST-free under the non-commercial rules.
If you sell a motor vehicle, the motor vehicle will be GST-free if the payment you receive is:
– less than 50% of the GST-inclusive market value of the vehicle sold, or
– less than 75% of the amount you paid to purchase the vehicle being sold.
Generally, if you trade-in a motor vehicle, the trade-in price will be the full market value of the vehicle, therefore the sale will not be GST-free under the first of the non-commercial rules.
However, if you trade-in a motor vehicle and the trade-in price is less than 75% of the amount you paid to purchase the motor vehicle, the sale will be GST-free under the second of the non-commercial rules.
The Fact Sheet offers detailed explanations and examples to assist with a charity’s tax obligations.
If you would like an electronic version in WORD format just send us an email with the words ATO Motor vehicle Trade-Ins in the subject line to firstname.lastname@example.org.