This is one of the most common questions we receive. I will try and keep the answer as simple and as brief as possible.
If the vehicle is a commercial vehicle, for example a ute, van or tradie dual cab that will legitimately be used a lot for work purposes, then we would advise to buy it in the business name. In most cases these types of vehicles are used to carry tools, bulky goods, stock/materials and can generally be excluded from Fringe Benefits Tax.
If the vehicle is a sedan, station wagon, 4WD etc (non-commercial vehicle), but is still used a lot for work purposes, then it still makes sense to buy the vehicle in the business name. There will be Fringe Benefits Tax payable though on the private portion of vehicle use. This is established by keeping a log book for 13 weeks. Remember, travel by the employee from home to work (or first work related location eg customer/supplier/post office) and return from work to home is classed as private travel.
If the vehicle is a sedan, station wagon, 4WD etc (non-commercial vehicle), and is only used sometimes for work related purposes but is mostly used for private purposes, then our advice is to not buy the car in the business name. The Fringe Benefits Tax is high, plus you have the extra cost and administration of doing the FBT return. Our suggestion would be to pay the employee a car allowance and let the employee buy the car themselves and claim the vehicle in their personal tax return. A recent discussion with a friend of mine in a large multinational company revealed that his company recently adopted this practice for all of their employees, so it looks like this strategy is sound and suits businesses of all sizes.
If you have further questions please do not hesitate to contact us.