The most complex process of recording a Fixed Asset is the purchase of a new Motor Vehicle. There are a number of factors to consider, including:
- Not every component of the Vehicle Purchase invoice is subject to GST. Therefore, the charges have to be broken down into multiple lines.
- The cost of the vehicle is only deductible for both GST and Income Tax up to a set threshold which is indexed every year
- Luxury Car Tax (LCT) also applies to vehicles over a certain purchase value
Note: this threshold is also indexed every year and changes between standard and fuel-efficient vehicles
Vehicles Components - Applicable GST
When new vehicles are purchased, the Car Dealership invoice includes a number of different charges, some inclusive and others exclusive of GST. Furthermore, some of these charges form part of the Asset's Book Value, whereas others are posted as vehicle expenses.
You can use the following table as a guide to correctly code the different components of a motor vehicle purchase.
| Vehicle Charges | Tax Rate | Account |
| Vehicle Cost (up to annual threshold) | GST on Expenses or GST on Capital | Motor Vehicles - At Cost |
| Stamp Duty | BAS Excluded | Motor Vehicles - At Cost |
| Vehicle Cost (above annual threshold) | BAS Excluded | Motor Vehicles - At Cost |
| Dealer Delivery | GST on Expenses or GST on Capital | Motor Vehicles - At Cost |
| Premium Branded Plates | BAS Excluded | Motor Vehicles - At Cost |
| CTP Insurance | BAS Excluded | Motor Vehicle - Registration and Insurance |
| Business Registration | BAS Excluded | Motor Vehicle - Registration and Insurance |
| GST over threshold | BAS Excluded | Other Expenses |
| Luxury Car Tax | BAS Excluded | Luxury Car Tax (Other Expenses) |
Record a New Vehicle (up to Annual Threshold)
Before recording the Purchase transaction, you should review the Vehicle Tax Invoice and break down the charges. In this example:
è Example of a new Vehicle Purchase invoiced charges
è Vehicle Cost Breakdown Calculation
Once you have calculated the vehicle's cost breakdown you can enter the vehicle purchase in Xero.
- Go to Contacts > All Contacts
- Find the Car Dealership Contact you have purchased the new vehicle from (or create it as a new Contact)
- Click on [New] > Bill
è The New Bill screen opens
- Select/Enter the following details (invoice Header):
- From > Confirm Supplier's Name
- Date > Enter the Vehicle Invoice date
- Due Date > Enter the Vehicle Invoice Due date
- Reference > Enter the Vehicle Invoice No / Deal No
- In the Invoice, you will need to break down the various components as per the calculations above:
- Vehicles - At Cost components
- Line 1 > Vehicle Value (this should include the total Sales Price, plus other vehicle parts/enhancements, minus the discounts)
- Line 2 > Dealer Charges
- Line 3 > Stamp Duty
- Line 4 > Plates
- Vehicles - Expense components
- Line 5 > Business Registration
- Line 6 > CTP Insurance
- Make sure the total of the Purchase transaction in Xero matches the total of the Vehicle invoice
- Attach the Vehicle Invoice to the Purchase transaction
- Click on [Approve]
Record a New Vehicle - value above Annual Threshold
If the vehicle purchase value is above the Vehicle claimable Annual Threshold the value above the threshold needs to be split into 2 additional lines:
- Line 7 > The vehicle additional value Ex GST > this needs to be added to the Vehicle - At Cost value
- Line 8 > The vehicles unrecoverable GST > this needs to be posted as Other Expenses
è Additional value above the Annual Vehicle Threshold
Record a New Vehicle - Luxury Car Tax
If the vehicle purchase price also includes Luxury Car Tax, the Luxury Car Tax value is added as a separate line to the invoice.
- Line 9 > Luxury Car Tax
è Luxury Car Tax applied to the vehicle cost
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