Leasor income and expenses for finance lease

 Author: AriATO(Community Support)Community Support

23 Oct 2023

Hi @johnski

Our tech team have provided the below info for you to consider.

First there's motor vehicles used by shareholders of private companies.

You'll see our website talks about if your business is a private company and you provide a vehicle to a shareholder or their associate (not in their role as an employee):

• we may treat it as a dividend or loan
• your related motor vehicle expenses may not be deductible.

A payment or other benefit provided by a private company to a shareholder, or their associate can be treated as a dividend for income tax purposes under Division 7A even if the participants treat it as some other form of transaction such as a loan, advance, gift or writing off a debt.

Section 109CA of the Income Tax Assessment Act 1936 (ITAA 1936) defines the circumstances in which providing an asset for use is a 'payment.'

The use of or a right to use a car leased by a private company may be a section 109CA payment. Ultimately this depends on the facts and circumstances of each transaction.

For more information on the use of an asset, have a look at Payments by private companies – use of assets

Another consideration is Division 7A and fringe benefits tax.

If a shareholder or an associate of a shareholder in a private company is an employee of that same company, the fringe benefits tax (FBT) provisions, instead of Division 7A may apply to the payments and other benefits received by the shareholder or associate.

For a benefit to be a fringe benefit, it must be provided in respect of employment of an employee even if provided to an associate of the employee or to a third party at the request of an employee or an associate.