Associate Lease
Tax Guide
General Guide to completion of the 2023 Income Tax Return for Associate Lease Providers
Scope of this guidance
This guide to completion of the income tax return for associate lease providers (the taxpayer) is provided on the assumption that the only business activity being carried on by the associate is the provision of a vehicle as part of an associate lease arrangement. If the taxpayer is conducting any other business activities in their own name, we recommend they seek independent taxation advice with regard to the completion of their return.
Further, the instructions below are appropriate for a taxpayer who provides a vehicle worth less than the luxury car limit in the year of acquisition ($64,741 in the 2022/23 year). A taxpayer providing vehicles worth more than this amount should seek taxation advice and guidance to assist the completion of their return and the tax consequences of the associate lease arrangement.
The responsibility for the accuracy of an income tax return rests with the taxpayer. This guide is provided for general information only and is not intended to constitute tax advice. Trinitas and JudsonKoman take no responsibility for taxpayers acting on, refraining from acting on, or relying on any information contained in this publication.
Lodgement process
Taxpayers lodging their own returns will need to log on to myTax via my.gov.au in order to complete and submit their returns. Both the following components will need to be completed:
2023 Individual Tax Return
2023 Individual Supplementary Tax Return
This guide does not contain instructions for the Individual Tax Return part of the lodgement process. The following information relates to the completion of the Supplementary Tax Return, which is required to be completed in addition to the Individual Tax Return, in relation to the associate lease arrangement.
Supplementary Tax Return –
Part 15: Net income or loss from business
Complete Part 15 by completing the “Business and professional items section”
P1
Associate lease income is not Personal Services Income, so answer “No” to this question.
P2
Description of main business or professional activity is “motor vehicle leasing”.
P3
Number of business activities for one associate lease is one.
P4
Status of business. If you commenced a new business during the 2021/22 year select C2. If you ceased your business during the 2021/22 year select C1. If neither option applies, then leave boxes blank.
P5
Usually, the business name will be the name of the taxpayer on their ABN registration. If the taxpayer has adopted a trading name, this trading name should be used. Include the taxpayer’s ABN provided by the ATO upon registration as a business.
P6
The business address of the main business will normally be the taxpayer’s home residential address.
P8
The business of associate leasing is “non-primary production” and the income and expenses should be disclosed accordingly.
The income to be declared is the lease payments received. If the taxpayer is registered for GST purposes, the amount to be included here is the GST exclusive amount. If the taxpayer is not registered for GST, the full amount of the income needs to be included at this label with no reduction for GST (A taxpayer is not entitled to provide a “tax invoice” charging GST to the recipient if they are not registered for GST).
Expenses associated with the leasing out of the vehicle to be claimed include:
If the taxpayer is financing the vehicle via a lease (and then sub-leasing out the vehicle) – the total costs of that lease (GST exclusive only if the taxpayer is registered for GST purposes).
Interest expenses associated with any loans (including chattel mortgage or hire purchase) to acquire the car.
Depreciation expenses involved with the ownership of the vehicle (if owned) – for cars acquired after 10 May 2006, depreciation should be claimed at 25.0% under the diminishing value method, or 12.5% under the prime cost method. There are options where an immediate write-off may be claimed, however, the taxpayer’s particular circumstances need to be considered first. Therefore, we suggest that the taxpayer obtain their own tax advice and guidance to determine if an immediate write-off is available.
Running costs of the vehicle paid for by the taxpayer. As the taxpayer is fully assessable on the income earned from the associate lease, no private apportionment is necessary for expenses paid by the taxpayer directly. If the employer of the employee meets all the running costs of the vehicle as part of the employee’s salary packaging arrangement, there will be no running costs for the taxpayer to claim.
Repair and maintenance expenses, such as servicing, if incurred by the taxpayer.
P9
If the amount arrived at in P8 is a loss then you will need to be complete the additional “Business loss activity details” at item P9. The completion of this section is beyond the scope of these instructions. We strongly advise that in the event of a loss the taxpayer seek assistance with the completion of their return and check with their financial adviser as to the effectiveness of the associate lease arrangement.
P10
Not applicable for motor vehicle leasing business operations as discussed at P8 above.
P18
Will need to be completed in the year in which vehicle depreciation is first claimed by the taxpayer (which will generally be on purchase of the vehicle). The amount to be disclosed here is the cost of the vehicle for which the taxpayer is claiming a deduction for the decline in value for the first time.
P20
Will need to be completed if the vehicle is disposed of during the course of the year. The termination value is the amount received in relation to the asset no longer held by the taxpayer.
JK Transition Accounting Services Pty Ltd trading as JudsonKoman ABN 78 636 074 934. Liability limited by a scheme approved under Professional Standards Legislation.