Key Legal Implications of Having a Company Car

A car can be used as an incentive for employees. Employees can use an executive car to meet with their clients. A truck or van can be used to deliver your products. These and more are many reasons why investing in a car for your business makes sense. But having a company car isn’t without its legalities. Here are some of them:

Costs, leases and taxes

You, as the business owner, are required to pay for various expenses including the registration, insurance, maintenance and the fuel costs of your vehicle. You have to factor in these items when you’re planning for the purchase of a vehicle or fleet.

The company, an employee and a leasing company may enter into a 3-way agreement to pay for a car. This is called a novated lease. The lease payments are made by the company using the pre-income tax of the employee. This reduces their taxable income and they get a car. Draw up a contract that lays out clearly the conditions and the costs for using the car.

The business owner may have to pay the FBT, or fringe benefits tax, if you or your employee uses the car for private reasons:

  • Parking the vehicle at or near an employee’s house, even if they’re not allowed to utilise it privately
  • Parking the vehicle in house that is also used as a place of business
  • Driving the car to and from the office.

Ask your tax agent for more information about novated leases

Vehicle surveillance and employee privacy

A car is an investment, so it’s wise to track its location for security reasons. GPS trackers will do the task of telling the vehicle’s location, speed and other information. There is no law yet in Queensland requiring an employer to inform their employee if they plan to install such device. But it is still a good idea to notify your employee.

Accident and damages

If the company car gets involved in an accident, the business owner is liable for the cost of damages even if the vehicle was being driven by the employee. The amount may be claimed from your insurance, but you may have to pay for the excess.

In some cases, you will not be required to pay for the damage. These may include:

  • If the employee was driving the vehicle to work but got into an accident while doing something illegal such as driving under the influence of an illegal substance.
  • If the employee was driving to work but intentionally caused the accident
  • If the employee was driving the car for private purposes.

Know more about the legalities of company vehicles by consulting with your accountant. PJS Accountants can help you organise your tax affairs. We work with large companies, SMEs, family businesses and individuals. For enquiries, contact PJS Accountants.