If your business is registered for GST and buys a vehicle used solely for business, you can generally claim the full GST included in the price, provided you hold a tax invoice. Private use is apportioned out. For a car costing more than the 2026–27 car limit of $69,883, the credit is capped at $6,353.
Key takeaways
- The car limit for 2026–27 is $69,883, which caps the GST credit on a car at $6,353 — one-eleventh of the limit.
- For GST purposes the ATO defines a car as a vehicle designed to carry a load of less than one tonne and fewer than nine passengers, and a commercial vehicle not designed principally to carry passengers is one of the listed exceptions to the cap.
- Luxury car tax is never claimable as a GST credit, no matter how much business use the vehicle gets.
- You need a valid tax invoice for any purchase over $82.50 including GST, and GST credits must be claimed on your BAS within four years.
- On a vehicle invoice the compulsory third party insurance carries GST, while registration charges, transfer fees and stamp duty do not.
Does your business qualify to claim the GST at all?
Three things have to line up before a GST credit exists.
- You are registered for GST. Registration is compulsory once your GST turnover reaches $75,000, and optional below that — though it is also compulsory if you want to claim fuel tax credits.
- The vehicle is used in carrying on your business. Solely business use points to the full credit; partly business means a partial credit.
- You hold a tax invoice. The ATO requires one for any purchase over $82.50 including GST, and a supplier has 28 days to provide one after you ask.
Miss any of the three and there is nothing to claim. A supplier who is not registered for GST cannot charge GST, so a private sale usually has no credit sitting in the price at all — the ATO suggests checking a supplier’s registration on ABN Lookup before you assume otherwise.
What is the car limit, and what does it cap?
The car limit is the ceiling the ATO puts on how much of a car’s value you can work with — both for depreciation under income tax and for the GST credit. For 2026–27 it is $69,883.
Buy a car above that and the GST credit is capped at one-eleventh of the limit: $6,353. The ATO notes the same cap applies to fuel-efficient cars.
| Threshold for 2026–27 | Amount |
|---|---|
| Car limit | $69,883 |
| Maximum GST credit on a car | $6,353 |
| Luxury car tax threshold — fuel-efficient | $91,661 |
| Luxury car tax threshold — all other vehicles | $80,809 |
The ATO’s own worked example makes the gap obvious. A non-fuel-efficient car bought on 12 July 2026 for $91,242.80 — which includes $8,075.91 of GST and $2,407.80 of luxury car tax — and used 100% for business gets a GST credit of $6,353, not the $8,075.91 actually paid. At 50% business use it halves again, to $3,176.50.
Does the cap apply to a one-tonne ute?
Not automatically, and this is where the answer most often gets assumed rather than checked.
For GST purposes the ATO defines a car as a motor vehicle designed to carry a load of less than one tonne and fewer than nine passengers. A vehicle designed to carry a tonne or more sits outside that definition.
Separately, the ATO lists cases where the full GST credit is available even on a car costing more than the car limit, provided it is used in carrying on your business and at least one of these applies:
- it is held solely as trading stock, other than for hire or lease
- you carry out research and development for the manufacturer of the car
- you export it in circumstances where the export is GST-free
- it is an emergency vehicle
- it is a commercial vehicle that is not designed for the principal purpose of carrying passengers
- it is a motor home or campervan
- it is fitted out for transporting disabled people seated in wheelchairs
The commercial-vehicle line is the one that matters for most work fleets. Whether a particular dual-cab clears it depends on the vehicle’s design, not on the signage or the ABN on the door. Your accountant should confirm it against the build plate before you lodge.
Can you claim the GST on luxury car tax?
No — and it does not matter how hard the vehicle works.
You cannot claim a credit for any luxury car tax you pay when you purchase a luxury car, regardless of how much you use the car in carrying on your business.
Luxury car tax runs at 33% of the amount above the threshold, and in 2026–27 that threshold is $80,809 for most vehicles and $91,661 for fuel-efficient ones. On a dealer invoice it sits a line away from the GST and looks like more of the same. It is not, and it never comes back.
How do you work out the business-use percentage?
If a vehicle goes home with a driver at night, part of its use is private, and the GST credit shrinks by that proportion. The ATO is direct about the evidence: you must be able to show the percentage you claim as business use, and have records to support your claim.
Two practical wrinkles are worth knowing:
- If your actual use turns out to differ from the intended use you claimed on, you may need to adjust the GST credits you have already claimed.
- Small businesses can make an annual private apportionment election, which accounts for the private portion once a year instead of on every activity statement.
The percentage itself is not something you can reasonably estimate at the end of the quarter. It comes out of trip records, and the same records feed the FBT and income tax side of the same vehicle. Axlerun logs trips and tags them business or private on iOS, Android and web, and exports the lot — the free Drive plan covers the first three vehicles forever, with GPS logging on the paid tiers. See Features & pricing for what sits on which plan.
Which running costs actually carry GST?
Not everything on a vehicle’s paperwork does, which is why hand-keying a rego notice into a spreadsheet as one GST-bearing amount quietly overstates the claim.
| Cost | GST in the price? |
|---|---|
| Fuel, servicing, tyres, parts | Yes — standard taxable supplies |
| Dealer delivery charges | Yes |
| Compulsory third party insurance | Yes |
| Registration charges | No, where paid by the dealer as agent for you |
| Transfer fees | No, on the same basis |
| Stamp duty | No — an Australian tax, and no regulation makes it subject to GST |
| Wages paid to drivers | No |
The ATO’s example of a vehicle sale itemises compulsory third party insurance at $297.00 including $27.00 of GST — under a tenth of the line, and nothing at all on the stamp duty above it. Split the components before you code the invoice.
What about a second-hand ute bought privately?
If you buy a second-hand vehicle from someone not registered for GST, there is no GST in the price, so ordinarily there is nothing to claim.
The exception is narrow and aimed at traders. If you bought the vehicle to sell or exchange it, and it cost more than $300, you can claim a credit when you sell it — the lesser of one-eleventh of what you paid or the GST payable on the sale. Buy privately and keep the vehicle in the fleet, and no GST credit is available.
Leasing works differently again. The GST credit on lease payments is based on business use, and the ATO says it is not limited to one-eleventh of the car limit.
What records does the ATO expect, and for how long?
The GST credit itself has a hard edge: credits must be claimed on your BAS within the four-year time limit. Past that, the entitlement is gone regardless of how good the paperwork is.
Three things are worth having filed against every vehicle, not scattered across a glovebox and an inbox:
- the tax invoice for the purchase, plus invoices for any running cost over $82.50
- evidence of the business-use percentage you applied
- a record of what you actually claimed, so an adjustment later has something to work from
One more thing that trips people up at tax time: where you have claimed a GST credit, the income tax deduction is the cost less that credit, and the cost you depreciate is reduced by the credit too. Claim the GST-inclusive figure in both places and you have claimed the same GST twice.
None of this is a judgement about your own position — Axlerun is software, not a tax agent. What it can do is keep the receipts, the rego dates and the trip records attached to the right vehicle so your accountant is not rebuilding the year from a shoebox in October. More on the record-keeping side is on the Axlerun blog.
Frequently asked questions
What is the car limit for 2026–27?
The car limit for the 2026–27 financial year is $69,883. It is the maximum value you can use to calculate depreciation on a vehicle first used or leased in that income year, and it also caps the GST credit. Where a car costs more than the limit, the ATO says the maximum GST credit is one-eleventh of it — $6,353.
Can I claim the full GST on a ute that costs more than the car limit?
Possibly. For GST purposes a car is a vehicle designed to carry a load under one tonne and fewer than nine passengers, so a heavier-payload vehicle falls outside that definition. The ATO also lists exceptions where the full credit is available, including a commercial vehicle not designed for the principal purpose of carrying passengers. Confirm your vehicle with your accountant.
Is there GST on vehicle registration and CTP?
They are treated differently. The ATO says GST applies to compulsory third party insurance and to dealer delivery charges, but not to registration charges, transfer fees or stamp duty where a dealer pays them as your agent. Its worked example shows CTP of $297.00 including $27.00 of GST, with no GST on the stamp duty beside it.
What happens if the ute is used privately as well?
You claim only the business proportion of the GST. The ATO requires you to be able to show the percentage you claim as business use and to hold records supporting it. If your actual use later differs from the use you claimed on, you may need to adjust the credits already claimed. Small businesses can elect to apportion private use annually.
How long do I have to claim a GST credit on a vehicle?
Four years. GST credits must be claimed on a business activity statement within the four-year time limit, after which the entitlement ends. You also need a valid tax invoice for any purchase over $82.50 including GST at the time you lodge — a supplier has 28 days to provide one after you request it.
Can I claim GST on a second-hand ute bought from a private seller?
Generally no. A seller who is not registered for GST cannot charge GST, so there is nothing in the price to claim. The exception applies when you buy the vehicle to sell or exchange it: if it cost more than $300 you can claim when you sell, limited to the lesser of one-eleventh of the price paid or the GST payable on the sale.
Sources
- 1.Purchasing a motor vehicle — GST and motor vehicles — Australian Taxation Office
- 2.About GST and motor vehicles — Australian Taxation Office
- 3.Car thresholds from 1 July (2026–27) — Australian Taxation Office — Small business newsroom
- 4.Luxury car tax rate and thresholds — Australian Taxation Office
- 5.When you can claim a GST credit — Australian Taxation Office
- 6.When you cannot claim a GST credit — Australian Taxation Office
- 7.Registering for GST — Australian Taxation Office
- 8.GST issues register — Motor vehicle industry partnership, Issue 4: delivery charges, stamp duty, registration and insurance — Australian Taxation Office
- 9.Payments to government agencies under Division 81 — Australian Taxation Office
- 10.Effect of GST credits on income tax deductions — Australian Taxation Office
Axlerun is fleet software, not a tax agent. Rates and rules change — confirm anything that affects your return with your accountant or the ATO.
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