Carey Group Quarterly Newsletter

Car Threshold Changes for 2025–26: What You Need to Know

If you’re planning to purchase a vehicle for business use this financial year, it’s important to understand the updated car depreciation and GST input credit thresholds that apply from 1 July 2025. These limits affect how much you can claim in your tax return and what portion of GST you can recover.

Key Thresholds for 2025–26

• Car limit for depreciation: $69,674
  This is the maximum value you can use to calculate depreciation for a car used for business purposes. If the car costs more than this amount, you can only claim depreciation up to the limit.
• Maximum GST input credit: $6,334
  This is the highest GST credit you can claim on a car purchase, calculated as one-eleventh of the car limit. If the car costs more than $69,674, your GST credit is capped at $6,334 (unless specific exceptions apply).
• Luxury Car Tax (LCT) thresholds:
  • $91,387 for fuel-efficient vehicles
  • $80,567 for other vehicles

If the car’s value exceeds these thresholds, LCT may apply. Importantly, you cannot claim an input tax credit for LCT, even if the car is used for business purposes.

What This Means for Your Business

These thresholds are particularly relevant for:

• Small businesses purchasing vehicles for operational use
• Sole traders and contractors using vehicles for work-related travel
• Employers providing vehicles to staff as part of salary packaging

If you’re buying a car that exceeds the depreciation limit or LCT threshold, your tax deductions and GST credits will be restricted. Planning ahead can help you maximise your claims and avoid unexpected costs.

Tips for Compliance

• Keep detailed records of the vehicle’s purchase price, usage, and business-related travel.
• Use logbooks to substantiate business use if claiming running costs.
• Consult your accountant or tax adviser before purchasing a high-value vehicle to understand the tax implications.

Timing Matters

These thresholds apply to vehicles first used or leased in the 2026 income year (i.e., from 1 July 2025 to 30 June 2026). If you purchased a vehicle before 1 July 2025, the previous year’s limits apply.

If you’re considering a vehicle purchase this year and want to ensure you’re making the most of available tax benefits, get in touch with our team. We can help you navigate the rules and optimise your deductions. 07 4760 5900 or email info@careygroup.com.au