Calculate the adjustment for the private use of a business motor vehicle
If you use a business car, station wagon, ute or van privately, you have a choice of three options for working out the private use adjustment:
- Use the period-by-period GST adjustment to make a capital or asset adjustment, remembering to adjust for running costs.
- Use the 24% method, which is a single calculation that covers the revenue and capital adjustments at the same time.
- Make an annual adjustment.
How to calculate the adjustment for the private use of a business motor vehicle using the period-by-period GST adjustment
The table below explains how to calculate the adjustment for the private use of a business motor vehicle using the period-by-period GST adjustment.
Scenario:
Adrienne, a sole trader with a two-monthly taxable period, uses her business car for private use. The cost of the car was $30,000 and its current market value is $26,000. Her three-month logbook test period showed 25% private use. The last two months' total running costs including GST for the car were $805, including:
- insurance $250
- petrol $380
- repairs $75, and
- registration $100.
| Step | What to do | Example |
|---|---|---|
| 1 |
Work out the asset's market value. |
The vehicle's market value is $26,000. |
| 2 |
Find out the straight line depreciation rate for the asset.
NoteThe straight line for a car is 18% if acquired before 1 April 2005 and 21% if acquired after 1 April 2005. |
The straight line depreciation rate for this vehicle is 21%. |
| 3 |
To work out the value of the private use revenue item adjustment, ie to adjust for running costs, multiply the running costs for the asset for the taxable period by private use percentage. |
$805 x 25% = $201.25 |
| 4 |
Work out the value of private use capital item adjustment:
|
$26,000 x 21% = $5,460 $5,460 divide by 6 = $910 $910 x 25% = $227.50 |
| 5 |
Work out the total private use adjustment:
|
$201.25 + $227.50 = $428.75 $428.75 x 3 divided by 23 = $55.92 |
How to calculate the adjustment for the private use of a business motor vehicle using the 24% method
This method is a type of period-by-period adjustment that uses a formula based on 24% of the cost price (including GST) of a motor vehicle. It covers the revenue and capital adjustments in one go. It can only be used for cars, station wagons, utes and vans. The private use percentage will come from your logbook, Alternatively, if you have replaced a business-owned vehicle and the private ongoing use of the second vehicle is the same as the original vehicle, you can use that percentage.
The table below explains how to calculate the adjustment for the private use of a business motor vehicle using the 24% method.
Scenario:
Shane has a two-monthly taxable period and uses a business car privately. The GST-inclusive cost of the vehicle was $20,000. He kept a logbook for three months, which showed that private trips made up 490 kms out of a total of 1,000 kms.
| Step | What to do | Example |
|---|---|---|
| 1 |
Work out the percentage of private or exempt use against the total use. Call this P. |
490 km divide by 1000 km = 49% (0.49) |
| 2 |
Work out 24% of the car's GST-inclusive purchase price to get the total costs for the year. Call this C. |
|
| 3 |
Multiply C by P and divide by the b=number of taxable periods per tax year. |
$4,800 x 49% = $2,352 $2,352 divide by 6 = $392. |
| 4 |
|
$392 x 3 divided by 23 = $51.13 |
Calculating the private use adjustment when GST rate changes
On 1 October 2010 the GST rate changed from 12.5% to 15%. If the asset was applied to private use prior to 1 October 2010 then the adjustment can be calculated at the rate of 12.5%, even if accounted for in a later return period.
To calculate a private use adjustment at 12.5% multiply the asset's market value by the private use percentage and divide by 9 (instead of multiplying by 3 then dividing by 23).
A GST registered person can also choose to make the adjustment at the new GST rate of 15% even if the change of use occurred prior to 1 October 2010.
Find out more
- Calculate a one-off adjustment for business assets used privately
- Calculate a period-by-period adjustment for business assets used privately
- Calculate an annual adjustment for business assets used privately
Date published: 29 Sep 2010
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