new car ok if for work? - Australian tax system

[annsie]

Hi Australians, am I right in thinking it's ok to buy a new car for my small business as I can claim depreciation etc through ATO?
Or do MMM theories still apply making it necessary to buy a cheap car?
Thanks in advance!

[englyn]

Short answer: no, MM theories still apply.
Slightly longer answer: Never buy anything for the tax deduction. You are making a loss in order to get approx 30% (or whatever) of it back. That still means you're 70% out of pocket.
Long answer: it depends on which aspect of MM theory you are talking about and what your goal is.

Saving money on depreciation? Cheap car. See "Slightly longer answer".
Saving opportunity cost of the work the money you're tying up in car inventory could be doing for you elsewhere? Cheap car.
Saving running costs? Still cheap car. I'm sure there's an analysis here somewhere of why older cars being more expensive to run than a new car due to repair costs is a fallacy.
Reducing environmental impact? Cheap car.
Looking like your business is solvent and like you're someone people feel confident working with? A little more tricky. Should still be possible to get something 5 years old that looks respectable, though.

[annsie]

You're a gem englyn.
Thanks for your clear thinking.
Just what I needed. :)

[marty998]

Advice is correct. With the following qualification:

If the choice is new car or cheap car, buy cheap car. IMO 2-3 year old cars are best, most of the depreciation has gone but you potentially still have a (perhaps limited) new car warranty remaining. Not likely to get a lemon either, cars go bad from either day dot or after a decade.

If the choice is buying it in your name or the business name, do it in the business name. So you can get your depreciation + maybe the GST back on the purchase as an input tax credit (DYOR).

[annsie]

Thanks to you, too, marty998.
Generosity of time and clear guidance is most appreciated.