Trust purchases car?

[Chris G]

Hi peoples,

Just a follow on from the "18year old with lots of nice toys (fancy cars!!)" thread in the lounge.

The idea of your trust purchasing a prestige car was mentioned. Just wondering what the rules are regarding trusts and cars? Can your trust lease a car? Buy outright? Tax advantages over a simple business lease or purchase? (presuming you also have your own business)

Sorry for raving on about fancy cars and I realise a lot of people see them as an evil waste of equity and bad debt but this idea is just as relevent to a cheaper,standard car as it is to prestige vehicles. On the other hand I'm sure there are lots of boys out there planing on buying a Porsche etc when they are wealthy from IP's! So what are some of the better ways of purchasing/leasing a car?

Cheers
Chris

 

[Sunstone]

Dear Chris,

Cars are a funny one to be owned by a company/trust.

If you have it owned by the company/trust then you will get the depreciation benefits, however when you sell it you will then have to charge GST perhaps making it less competitive to sell when you do have to replace it in the future. (Cars unfortunately do wear out.)

Cheers,

Sunstone.

 

[geoffw]

A car in a discretionary trust would probably have to be offset against profit making property for it to be tax effective.

However, as Dale has pointed out, having a car in a trust opens up the chances of lawsuits, as a car is potentially much more damaging than a house- and thus loses a lot of the advantage of the trust.

If you have a business already in place, it may be better to run a car through a company. If you are in the higher tax brackets, it can be quite tax effective to run a car though salary sacrifice- the effectiveness depends on how many km you drive in a year.

 

[bbg2003]

would'nt it be better to buy it in your personal name and recieve a car allowance from the company/trust?

It is an expense for the entity and not taxable income if you are reimbursed for it's use as part of the business


bbg2003

 

[always_learning]

Originally posted by geoffw


However, as Dale has pointed out, having a car in a trust opens up the chances of lawsuits, as a car is potentially much more damaging than a house- and thus loses a lot of the advantage of the trust.

Is it the car or the driver who is liable in the event of accidents?

ie.

My family trusts buys a car, leases it to me personally.

Drive to beach, get drunk on a good bottle of red, drive home crash into Benz full of lawyers on there way home from a "Liability for fun and profit seminar". Would it be me who would be liable? or the trust that owns the car?

Drive to visit my IP, get drunk with the PM over a long lunch...drive home and crash into the same Benz full of Lawyers.

 

[geoffw]

Insurance company won't pay, as you were unsober. Lawyers see the car is owned by the trust (and probably the fact that it's insured in the name of the trust) so go to the place where the money is- in the trust, which also has a few IPs.

Bye IPs.

 

[duncan_m]

Originally posted by geoffw
Insurance company won't pay, as you were unsober. Lawyers see the car is owned by the trust (and probably the fact that it's insured in the name of the trust) so go to the place where the money is- in the trust, which also has a few IPs.

Bye IPs.

Not quite..

You see, the Trust doesnt own anything, the Trustee holds everything in Trust for the beneficiaries. The Lawyers can only come after the Trustee.

The very day after having an accident of this nature, The Appointor would sack the Trustee, create a NEW corporate Trustee and appoint them. The assets would be transferred to the new Trustee, again to be held in Trust for the Beneficiaries.

Assets intact.

Duncan.

 

[geoffw]

Duncan,

Is this assuming there is a corporate trustee set up for the trust to begin with?

 

[duncan_m]

Originally posted by geoffw
Duncan,

Is this assuming there is a corporate trustee set up for the trust to begin with?

Geoff,

The nature of the Trustee doesnt really matter.. Company or Person. The concept is the same.

With a personal trustee you would want a much more unassailablly clear chain of documentation that supports your claim that the Assets were indeed held in Trust.. A corporate trustee from day one is indeed wiser.

Duncan.

 

[Rolf Latham]

Hiya

Liability for a car prang rests not with the owner of the vehicle but the operator.

A car sitting in a garage doesnt cause an accident, its the nut behind the wheel :O)

ta
rolf

 

[always_learning]

What if Mr Rolf L was driving to visit a client on work for asapfinancial in the asapfinancial's company car? Wouldn't the company be liable for Rolf L's actions as a company man on company business?

I remember a long time ex-workmate who was working for a small company, as a alcoholic he was drunk at the wheel of a company car on "company" business ( well it was 4pm and he had been at the pub all afternoon). Naturally the insurance company refused the claim ( he lost his licence and paid a fine for being 0.14), his ex-company requested him to pay the damages bill, he refused and resigned ( basically walked out the door)....he said his ex-company had to pay damages? Could it be true?

 

[bbg2003]

You are personally liable.
company directors are also personally liable.

Originally posted by duncan_m
Not quite..

You see, the Trust doesnt own anything, the Trustee holds everything in Trust for the beneficiaries. The Lawyers can only come after the Trustee.

The very day after having an accident of this nature, The Appointor would sack the Trustee, create a NEW corporate Trustee and appoint them. The assets would be transferred to the new Trustee, again to be held in Trust for the Beneficiaries.

Assets intact.

Duncan.

 

[bundy1964]

Originally posted by always_learning
his ex-company requested him to pay the damages bill, he refused and resigned ( basically walked out the door)....he said his ex-company had to pay damages? Could it be true?

I know when I worked for a car yard the delivery driver was caught speeding in the company van and had his wages docked the amount of the fine.........I would guess the company would take the damages out of long service leave, holiday pay etc.

bundy

 

[MF35]

Just on the liability issue here. It's my understanding that there are two areas that affect the type of circumstance described (car accident in company or trust owned car by a drunk employee).

The first is criminal or offence related responsiblity which lies squarely with the driver for what ever part of the law he or she is deemed to have broken in having the collision. IE - PCA offence (drunk driving), Dangerous driving causing grievious bodily harm under the Crimes act or negeligent driving etc under the Australian Road Rules. The owner / trust (if it is a separate person / body from the driver) can be guilty of secondary offences that relate to insuring the person you allow to drive your car is licensed (requirement to inspect their drivers licence), or such things as aiding and abbetting an offence (ie you know their drunk and let them drive anyway), or failing to nominate the driver at the time of the collision. This concept of criminal responsibility is fairly straight forward.

The second is civil responsiblity. It is important to note that civil responsibility is completely separate and exists on top of criminal responsibility. IE - the driver can be guilty of Dangerous driving and be punished by the criminal courts and then also be sued by an aggrieved party for damages for the same thing. More importantly BOTH THE OWNER AND THE DRIVER MIGHT BE SUED. For example if the aggrieved party alleged (and had some legal grounds to do so) the owner / employer / trustee was in breach of their "duty of care" as they knew the driver / employee was an alcoholic but still allowed him to drive around with no supervision or genuine attempts to prevent what is clearly dangerous and unlawful behaviour of their employee their may be grounds to sue BOTH of them. The person with the most to worry about would appear to be the driver. For the owner body / employer to be civily responsible I would have thought the owner body / employer would have to have been neglegent either in it's supervision and 'duty of car', or the act that caused the damage or harm would have to be one carried out by the employee as instructed by the employer and that this act itself resulted in the damage or harm. Eg if it was part of compay policy to exceed the speed limit to get the job done the company would be as liable as the driver civily. The example sounds ridiculous I know but the message would hold for other more relevant situations.

I am not a solicitor and this is not offered as legal advice but only to point out what I understand as the basics of how the civil and criminal law of responsibility relate to the circumstances discussed in this thread. (My area of training is criminal investigation / police). In civil matters such as those described the fact that a driver didn't end up having to pay for the damage he caused using the company car doesn't necessarily mean he wasn't liable for it. It's more GOOD LUCK! Other factors such as the time, effort and Cost the employer or aggrieved party might have to go through to get the money, and the likelihood of the person to be sued having the money would all impact heavily on legal advice as to whether sueing to recoup the damages was the way to go. EG would you spend 20k in legal fees trying to get 30k out of someone who may not even have the money.

Hope this makes sense.

MF