Understanding the maximum GST you can claim on a company vehicle

Buying a motor vehicle through your company can give you a generous tax credit, but the Australian Taxation Office (ATO) has set a limitation on how much GST you can claim. This guide breaks down the rules so you can maximise your entitlement and avoid nasty surprises.

How GST credits work on business vehicles

You can generally claim a GST credit for the GST included in the price of a vehicle if you’re registered for GST and the vehicle is used in carrying on your business -> ato.gov.au. If the vehicle is used partly for business and partly for private purposes, you must apportion your claim based on the business‑use percentage -> ato.gov.au. For example, a tradesperson who uses a van 80% for work and 20% for private errands can only claim 80% of the eligible GST (the business use portion).

The car limit and why it matters

The ATO imposes a car limit on passenger vehicles designed to carry a load of less than one tonne and fewer than nine passengers. This limit is used to calculate both depreciation deductions and the maximum GST credit and is indexed annually -> ato.gov.au. If you buy a car and the price exceeds this limit, the maximum GST credit you can claim is one‑eleventh of the car limit -> ato.gov.au.

For the 2024–25 and 2025–26 financial years, the car limit is $69,674, so the most GST credit you can claim is $6,334 -> ato.gov.au. This figure applies to both fuel‑efficient and non‑fuel‑efficient cars and is unchanged for 2025–26 because the indexation factor was less than one -> ato.gov.au. By contrast, the 2023–24 car limit was $68,108 and the maximum GST credit was $6,191 (one‑eleventh of $68,108) – so we are on the way up!

When your purchase price exceeds the limit, you must only record the car limit (or the business‑use portion of it) at label G10 on your Business Activity Statement -> ato.gov.au. Under the accounts method you include one‑eleventh of the car limit (or the business‑use portion) at label 1B for GST on purchases -> ato.gov.au.

Example: buying a luxury car

Darren bought a non‑fuel‑efficient car for $91,315 (including $8,091 GST and $2,480 luxury car tax) in July 2025. He plans to use it 100% in his business. Because the car limit for 2025–26 is $69,674, the most GST credit he can claim is $6,334, even though he paid $8,091 in GST -> ato.gov.au. He reports $69,674 at G10 and claims a GST credit of $6,334 at 1B -> ato.gov.au. If Darren used the car only 50% for business, he would report $34,837 and claim a GST credit of $3,167 -> ato.gov.au. Importantly, the luxury car tax paid on the vehicle isn’t creditable -> ato.gov.au.

Exceptions where you can claim the full GST

There are situations where the car limit doesn’t restrict your GST credit. You can claim the full GST amount even if the car costs more than the car limit when the vehicle is - ato.gov.au:

Trading stock (other than a car held for hire or lease). Car dealers usually claim the full GST because their vehicles are held for resale.
Used for research and development for the car manufacturer.
Exported, provided the export is GST‑free.
An emergency vehicle such as an ambulance or fire appliance.
A commercial vehicle not designed primarily to carry passengers, such as a heavy goods truck.
A motor home or campervan.
Modified to transport people in wheelchairs (unless the sale itself was GST‑free).

Leasing, second‑hand cars and time limits

Leased vehicles are treated differently: you can claim GST credits on each lease payment, and the car limit does not cap your claim -> ato.gov.au. When you buy a second‑hand vehicle from someone who isn’t registered for GST, you may be able to claim an input tax credit later when you sell the vehicle, but only if you purchased it for resale and the cost was more than $300 -> ato.gov.au. If you buy a second‑hand vehicle from an unregistered private seller for your own use, there’s no GST to claim -> ato.gov.au.

Finally, GST credits must generally be claimed within four years of the date of purchase -> ato.gov.au. Ensure you keep accurate records of your business‑use percentage and tax invoices so you can substantiate your claim if asked.

Key takeaways

To claim GST on a company vehicle, you must be registered for GST and the vehicle must be used for business purposes.
A car limit (currently $69,674) caps how much of the purchase price is eligible for GST credits; the maximum credit is one‑eleventh of the limit, which is $6,334.
If the car costs more than the car limit, you still record only the limit (or the business‑use proportion) on your activity statement.
Exceptions apply for trading stock, emergency or commercial vehicles and certain other categories.

By understanding the car limit and the rules around partial business use, you can make informed decisions when purchasing vehicles through your business and ensure you maximise - and legitimately claim - your GST credits.