Buying a Commercial Vehicle Through Your Business

Same brand, different tax rules

Toyota offers two popular Hiace variants:

• The Hiace Van, with a carrying capacity of one tonne or more
• The Hiace Crew Cab, with a capacity under one tonne

The difference may seem minor at first glance, but under Australian tax law, it changes how each vehicle is classified:

• The Hiace Van is treated as a vehicle other than a car
• The Hiace Crew Cab is classified as a car for tax purposes

Although both are built for commercial use, this classification has direct tax consequences.

Typically, “cars” are subject to a depreciation cap (currently around $67,000). However, if a vehicle is not primarily designed to carry passengers, like the Hiace Crew Cab, it may be exempt from the cap.

This means you can claim depreciation on the full purchase price and may also be eligible for the full GST input tax credit, even if the vehicle exceeds the car limit.

This distinction could make a noticeable difference to your business’s bottom line.

Commercial doesn’t always mean exempt

Fringe Benefits Tax (FBT) is where the distinction between “car” and “non-car” vehicles becomes especially important.

For vehicles classified as cars, the Australian Taxation Office (ATO) generally applies the statutory method, which calculates FBT as 20% of the vehicle’s purchase price regardless of how much private use it gets.

For vehicles not classified as cars, a different method applies. The ATO allows the cents-per-kilometre method, which is based on actual usage. This can be more favourable if private use is limited and well-documented.

A common misconception is that commercial vehicles are automatically exempt from FBT. In reality, the exemption only applies when private use is minor, infrequent and irregular. According to the ATO, this means:

• Total private use is less than 1,000 km per year
• No single private journey exceeds 200 km

That works out to around 20 km of private use per week. If you exceed these limits, the vehicle becomes subject to FBT. So, how you calculate it becomes critical in managing your tax obligations.

When electric cars don’t qualify

Electric vehicles (EVs) are increasingly popular thanks to government incentives, including potential FBT exemptions. But here’s the catch: these exemptions only apply to EVs that are classified as "cars" under Australian tax law.

That means EVs with a carrying capacity of one tonne or more fall outside the exemption and are treated differently for FBT purposes.

There’s also uncertainty around how long the current FBT exemption will remain in place. While it's supported under current policy, future changes are possible. If you're considering an EV purchase, exploring financing options could be a smart move.

In some cases, such as with Plug-in Hybrid Electric Vehicles (PHEVs), ongoing lease or loan arrangements have helped buyers retain access to incentives, even after policy updates. While there’s no guarantee, financing an EV could offer added flexibility if the rules shift.