Ask Ban Tacs Question
A client (a company) has purchased a new vehicle for use by the company.
The Tax Invoice for the vehicle and the lending for the vehicle are both in the company name.
However, in error, the vehicle name was registered in the name of the Director rather than in the name of the company. The company has an ABN and is registered for GST, the Director does not have an ABN and is not registered for GST.
The Motor Vehicle Registry were prepared to change the name on the registration from the name of the Director to the name of the company without the client incurring additional stamp duty. They would only do this if they were provided a letter from the motor dealer stating that the original registration in the Directors name was the dealers error.
The dealer refused because it was on our clients instructions that he/she erroneously registered the car in the Directors name. The dealer also informed our client that the name on the SA Motor Vehicle registration papers was only the name of the ” Licensed Operator of the Vehicle” and was not indicative of ownership of the motor vehicle and, on that basis, the motor dealer advised that the company would still be viewed as the owner of the vehicle by the ATO.
This is not in accordance with our recent experience with the ATO where they have called for motor vehicle registration documents as proof of ownership.
Our questions specifically are – Is the dealer correct?
As a result can we:
1. Claim the input tax credit for the vehicle purchase (as the tax invoice is in the company name)
2. Claim all expenses for the vehicle including interest on the loan (also in the company name), depreciation and running expenses as a legitimate expense in the company?
Answer
You have two issues here.
Firstly are you ok to claim the GST back on the vehicle and ongoing expenses for the vehicle? You have a tax invoice in the company name. As it is a company there is no question of private use so the tax invoice allows the company to claim the GST back. Even if that invoice was in the director’s name the company would still be allowed to claim the GST by simply reimbursing him or her. Div 111
https://www.ato.gov.au/law/view/fulldocument?filename=PAC19990055#PAC/19990055/111-1
The second issue is whether the company “holds” the vehicle for the purposes of claiming the associated expenses as a tax deduction. That invoice is very irrefutable proof. But to cover off simply get the director to give, in writing, a declaration that he holds the registration as nominee for the company.
The ATO may try and argue whatever they think they can get away with. I have seen them try it on when it was very clear to them what the truth was. Sometimes there is nothing you can do to protect against their bullying if that is what they decide they want to do. You just have to go to the ombudsman.
But when it comes down to the question of fact the company owns the vehicle, it purchased the vehicle and has a receipt so you just have to stand firm. Can you imagine having to try and argue the other way around?
The ATO may accept registration as proof of ownership that is really just a concession. They also accept that one spouse can be the registered owner of a car but both spouses actually own it. They just ask the registered owner to complete a declaration of joint ownership. Registration may be an acceptable, by the ATO as a method of proving ownership but it can never override a receipt for the purchase of the vehicle, that is a irrefutable fact as to who the owner is. When you lease a vehicle it is owned by the finance company but the registration is in your name. I agree with the dealer registration does not prove ownership.
