GST on motor vehicles
This factsheet covers the GST side of buying and running a business vehicle — the input tax credit, the cap that applies to it, and how the vehicle type changes the answer. For the income tax deduction side — cents per kilometre versus logbook, depreciation, and the rules for companies and trusts — see our companion factsheet Motor vehicle expenses for small business. The two interact, and the same vehicle can be capped for one and not the other.
Most business owners know they can claim the GST on a work vehicle. Far fewer know that on a passenger car the claim is capped, no matter what the vehicle cost — and that a ute or van built to carry more than a tonne is not capped at all. Getting the vehicle type wrong is the single most common error we see, in both directions.
English & Chinese PDF versions of this factsheet are available on request — please contact us.
* General information only. Kristy Pan & Co. provides this material for general knowledge; it does not constitute tax or financial advice and does not take account of your specific circumstances. This information is current as at 20 August 2026; we will do our best to update it when any policy or legislation changes. Please contact us before acting.
The one-eleventh rule
GST is one eleventh of a GST-inclusive price. If your business is registered for GST and buys a vehicle to use in the business, the input tax credit is one eleventh of what you paid — subject to two things: how much you use the vehicle for business, and the cap in section 2 below.
You must be registered
The claim belongs to a GST-registered entity. If you are not registered, there is no credit to claim, and the GST simply forms part of the vehicle’s cost for depreciation.
You must hold a tax invoice
A valid tax invoice from the dealer, held before you lodge the BAS that contains the claim. A contract of sale or a finance schedule is not a substitute.
Business use only
You claim to the extent the vehicle is used for a creditable purpose. A car used 70% for business gives 70% of the credit. The private share is not claimable.
A car provided to an employee as a fringe benefit is treated as wholly for a creditable purpose.
Where the vehicle is provided to an employee and the private use gives rise to a fringe benefit, you do not apportion the GST for that private use. The employer claims the full credit, still subject to the car limit, and the private use is dealt with through FBT instead. This is one of the few places where the FBT system works in your favour on the GST side, and it is regularly missed.
The cap almost everyone forgets
If the vehicle is a car for tax purposes, your GST credit is capped at one eleventh of the car limit — regardless of what you actually paid. Spend $120,000 on a car and you still claim the same GST as someone who spent $69,883.
2026–27
Car limit $69,883.
Maximum GST credit $6,353.
2025–26
Car limit $69,674.
Maximum GST credit $6,334.
Then apportion
The cap is applied first, then reduced for private use. A capped car used 60% for business gives 60% of $6,353.
A worked example
A consultant buys a $99,000 sedan in the 2026–27 year and uses it 80% for business.
$6,353 × 80% = $5,082, not $99,000 ÷ 11 × 80% = $7,200.
The untrimmed calculation overclaims by more than $2,000. Because the vehicle is a car, the credit is worked out from the car limit rather than the purchase price, and only then reduced to the business-use share. The same logic flows through to the income tax side, where the cost on which you claim depreciation is capped at the same $69,883.
Is it a “car”? The one-tonne test
Everything above turns on one classification. A vehicle is a car if it is designed to carry a load of less than one tonne and fewer than nine passengers. Meet both and the cap applies. Fail either and the cap does not apply at all — you claim one eleventh of the whole price, apportioned for business use.
Capped — a car
Sedans, hatchbacks, wagons, most SUVs, and dual-cab utes whose payload comes in under one tonne. Credit limited to $6,353 for 2026–27.
Not capped
Trucks, most one-tonne and larger vans, and any vehicle built to carry nine or more passengers. Full credit on the whole price, apportioned for business use.
How to check
Take the manufacturer’s gross vehicle mass and subtract the kerb weight. The difference is the carrying capacity. Keep the specification sheet on file.
Do not assume a ute is over a tonne. Many popular dual-cabs are not.
Adding a canopy, bull bar, tow bar or tray to a dual cab increases the kerb weight and therefore reduces the carrying capacity, which can push a vehicle that was marginally over a tonne back under it. Two identical models can fall on opposite sides of the line depending on how they were optioned. Check the compliance plate and the build specification for the actual vehicle, not the model brochure, and check it as delivered.
Electric vehicles
Electric cars attract generous treatment in two other parts of the tax system, and business owners frequently assume that generosity extends to GST. It does not.
An electric car is capped at the same $6,353. The LCT and FBT concessions do not change it.
Three separate thresholds apply to an expensive electric car, and they are not the same number. The luxury car tax threshold for fuel-efficient vehicles is higher than for other cars. The electric car FBT exemption uses its own threshold again. But the GST car limit is identical to a petrol or diesel car. A $90,000 EV that is FBT-exempt and below the fuel-efficient LCT threshold still gives a maximum GST credit of $6,353.
The same distinction in section 3 still decides the question. An electric van or truck built to carry more than a tonne is not a car, and is not capped. An electric passenger vehicle is.
Luxury car tax is not claimable
Where a vehicle is priced above the luxury car tax threshold, the dealer charges LCT on top of the price and the GST. That LCT is not an input tax credit. You cannot claim it, and you cannot fold it into the GST calculation.
It is worth seeing the whole picture on an expensive car before you commit. The GST credit is capped, the depreciation is capped at the same figure, and the LCT on top is simply a cost. The gap between the sticker price and what the business actually recovers is wider than most buyers expect, and it is a conversation worth having before the order is signed rather than at year end.
Fuel, servicing and running costs
The cap applies to the vehicle itself, not to what it costs to run. Fuel, repairs, servicing, tyres, registration and insurance all carry GST, and all are claimable at one eleventh, apportioned to the business-use share. There is no ceiling on these.
The per-kilometre rate is an income tax deduction only. It carries no input tax credit.
The cents-per-kilometre method is an all-inclusive statutory rate rather than a record of actual, itemised expenditure, so no GST credit arises from claiming it. If you want the GST back on your running costs you need actual tax invoices and a business-use percentage, which in practice means a logbook. For a low-kilometre vehicle the simplicity may still be worth more than the credit; for a vehicle doing serious business kilometres it usually is not. The income tax comparison between the two methods is set out in our motor vehicle expenses factsheet.
Charging an electric vehicle at home
Home charging is hard to separate from the household’s own electricity. Where you cannot produce accurate meter readings for the vehicle alone, the ATO allows a shortcut rate per kilometre to work out the electricity cost. It is set by FBT year (1 April to 31 March), not by income year, so it does not line up with the figures elsewhere in this factsheet.
FBT year ending 31 March 2027
From 1 April 2026: 5.47 cents per kilometre.
FBT years ending 31 March 2023 to 2026
4.20 cents per kilometre.
No GST credit from the rate
Like cents per kilometre, the shortcut gives you a cost figure, not itemised expenditure supported by a tax invoice. It does not create an input tax credit.
The rate matters most where an electric car is provided to an employee, because it feeds the FBT calculation. If you do have a dedicated meter for the vehicle, you can use the actual electricity cost instead, and should compare the two.
How you finance it changes the timing
The amount of the credit is set by the rules above. When you get it depends on how the vehicle is financed and whether you account for GST on a cash or accruals basis.
Outright or chattel mortgage
On an accruals basis the whole credit is available in the period you hold the tax invoice, even though the loan is repaid over years.
Hire purchase, cash basis
Credits are claimed on the principal component of each repayment as you make it, until the cap is reached. The interest component carries no GST.
Novated lease
The obligations sit with the employer, who claims the credits on the lease payments. The arrangement also has FBT consequences that should be modelled first.
What to do before you buy
Keep a 12-week logbook
It sets the business-use percentage for both the GST credit and the deduction, and stays valid for up to five years while the pattern of use holds.
Check the payload as delivered
Confirm carrying capacity from the build specification for your actual vehicle, with the accessories fitted. It decides whether the cap applies at all.
Buy accessories separately
Accessories acquired as a separate purchase after the vehicle, rather than as part of one composite supply, are not restricted by the car limit.
Do not overclaim on an expensive car
The most frequent adjustment we see is one eleventh of the full price on a car well above the limit. It is easy for the ATO to spot and it carries interest.
How we help
We model the whole cost of a vehicle before purchase — the recoverable GST, the capped depreciation, any luxury car tax, and the FBT position if an employee will drive it — so the decision is made on the after-tax number rather than the sticker price. We also review vehicles already on the books, since a misclassified ute is usually worth correcting in both directions. Talk to us before you sign the order.
Glossary of terms
- Input tax credit
- The GST included in the price of something your business buys, which a GST-registered business can claim back on its BAS. Usually one eleventh of the GST-inclusive price.
- Creditable purpose
- Use of a purchase in carrying on your business. Private or domestic use is not a creditable purpose, and the credit is reduced accordingly.
- Car
- For these rules, a motor vehicle designed to carry a load of less than one tonne and fewer than nine passengers. Vehicles that fail either test are not cars and are not subject to the car limit.
- Car limit
- The maximum cost on which GST credits and depreciation can be claimed for a car. $69,883 for 2026-27 and $69,674 for 2025-26, giving maximum GST credits of $6,353 and $6,334.
- GVM
- Gross vehicle mass: the maximum the vehicle may weigh fully loaded, set by the manufacturer. GVM less kerb weight gives the carrying capacity used in the one-tonne test.
- LCT
- Luxury car tax, charged on cars above a value threshold. It is not an input tax credit and cannot be claimed back, unlike the GST on the same vehicle.
- Fringe benefit
- A benefit provided to an employee in connection with their employment, such as the use of a company car for private travel.
- FBT
- Fringe benefits tax, paid by the employer on the value of benefits provided to employees. Assessed separately from income tax and GST.
- Electric car FBT exemption
- An exemption from FBT for eligible zero and low emissions vehicles below a value threshold. It does not change the GST car limit.
- BAS
- Business activity statement: the return on which GST collected and input tax credits claimed are reported to the ATO.
- ATO
- The Australian Taxation Office, the federal revenue authority that administers GST, income tax and FBT.