Changing use of car brings GST trap 11 Nov 2020

Suppose you buy an expensive car for your business and you estimate 75 percent of the use will be for business and 25 percent will be private.

You keep the car for 10 years and then you take it over privately. You will then have to give back all the GST you have claimed. Using very extreme figures, shall we say your original GST claim was $30,000 (a somewhat expensive car).

You now have to pay back to the Inland Revenue $30,000.

Contrast this with selling the car, which may be worth $3000. You would only have to pay the Inland Revenue its share of that amount. Strangely, the system works in reverse. Suppose the car becomes 100 percent business use then the effect of the adjustment is to allow the full amount of GST on the original cost.

The Government is looking into this and changes are expected in the New Year. It may pay to wait, if you are thinking of taking your car out of your business for private use.

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