Tag Archives: Vehicle

Buying a van – which one?

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When buying a new car, most people already have a strong opinion about what they want. Colour, brand, features etc., can be a very personal decision. However, where do you start if you need a new van for your small business, especially if you have not bought one before? This guide will help you understand what you should consider in making your decision about buying a van.

A van is a medium-sized motor vehicle, typically without side windows in the rear section of the body, for transporting goods.

WHY buy a Van?

If you need to transport goods in an enclosed vehicle that will not fit in a car, that needs to be protected from the weather and kept secure whilst still being very maneuverable and economical to run. Then a van might be the answer.

The small van is synonymous with small businesses, whether a tradesman, delivery driver, or even a mobile barista. They offer great cargo carrying capacity whilst driveable on a standard license and can still be easily parked.

WHAT factors should influence my decision when buying a Van?

When considering buying a van, you should evaluate the following:

Specifications
  • Size – When you consider your needs, vans will normally be described as short or long wheelbase, which indicates length. Think about what you need to carry and thus your required dimensions. Width is also key if, for example, you need to be able to load a standard-size pallet in the rear. The bigger the van, the harder it will be to park and maneuver.
  • Roof height – Being able to walk around upright may be a requirement but remember you might now no longer be able to drive into a loading dock or car park that has height restrictions.
  • Payload – What is the maximum weight the van will carry? Note this measure will also have to include vehicle occupants and fuel weight. A twin rear wheel axle will allow additional weight to be carried. It is important to know that a gross vehicle weight over 4.5 tons will require a special driver’s license.
  • Engine – Traditionally, petrol gives better speed whilst diesel provides more pulling power and fuel economy. Another advantage is a diesel engine will have a longer service interval and is designed to do more kilometres keeping your van on the road longer.
  • Drive train – Although more expensive, an automatic transmission may significantly reduce your driving fatigue if you are negotiating city traffic. In the country, an all-wheel-drive variant might be needed to get you where you need to go.
Passenger considerations when buying a van
  • Doors – Door configuration can also be very important depending on how you want to use the van. Say you want to reverse up to a loading dock, then barn-style doors with 180-degree hinges allow you to do this. Sliding doors on both sides allow better access to contents etc. If you have ladders on the roof, will a lifting tailgate allow you to access them?
  • Weekend warrior – If the van will also be your transport during your time off, are there any considerations you need to make, like extra seating or provision to carry a bike or surfboard?
  • Seating– Extra seating is available in some models if your van is to carry the workers and the tools. Indeed most car manufacturers offer a small minivan in the same format for moving up to 12 people (a special driver’s license is required if you have more than 12 seats)
  • Comfort – Vans typically have a very upright seating position. If driving all day, consider this carefully when test-driving vans. You might also be able to pay extra to have more creature comforts like climate control air-conditioning.
Nice to haves when buying a van
  • Parking aids – Rear parking sensors and a camera will greatly assist in reversing into those hard-to-get spaces.
  • Safety features, if available, might save someone’s life or make driving just that much simpler and could include adaptive cruise control, hill start, speed limiters, blind-spot monitoring, autonomous emergency braking, automatic headlights, lane departure, road sign assist, etc.
  • Internal fit-out – You want your van fit for purpose, and lots of options are available and could include interior lining, refrigeration, safety barriers, built-in navigation, racking, draws, tie-down hooks, onboard power, etc.
  • Accessories – A van can become more versatile with optional accessories like roof rack, side awning, roof ladder, interior lighting, towbar, rear step, cargo barrier, grab handles, etc.
  • Branding – A van is also a mobile billboard and gives you the canvas to create advertising on its side to promote your business. Some businesses might want to stay incognito if the van carries expensive items.
  • Warranty & reputation – Check for how many years of warranty you get if used in a commercial environment. Also, check online forums where others may share their experiences of driving that vehicle.
  • ANCAP Safety measures how safe your car/van will be in the event of a crash. Ratings for vans in Australia can be found here. Simply the more stars, the better.
Running costs
  • Capped servicing – Some van manufacturers will offer a fixed-price servicing plan which helps you with your budgeting.
  • Running costs – Be realistic on just how much it will cost you to keep your van on the road and use this cost in your business planning to understand costs vs revenue.
  • Repairability –  Chances are, as a commercial vehicle, your van will do many more kilometres than a car. This, unfortunately, increases your chances of having an accident. How easy is it to get replacement panels, and at what cost? Because of the nature of this being a commercial vehicle, it is likely the interior fittings will be designed to take some punishment.
  • Insurance will differ by make and the driver’s age and driving record. Vans generally will do more kilometres, so more likely to be in an accident and will attract higher premiums.

HOW do I buy a van?

What is your budget? Just like cars, there are dealers for both new and 2nd hand. You can, of course, buy privately.

Car dealers might offer drive-away deals and special financing deals to encourage you to purchase. Look out for bonuses like roadside assistance or scheduled servicing thrown in.

Check the latest rules as you might be eligible for an instant asset write-off from the ATO.
Car dealers might also offer fleet deals or a special price for ABN holders.  The GST on your vehicle may also be claimable

Note: Registration is generally more expensive for a business vehicle but is also claimable as an expense.

HINT – Buying a van

Before you rush out to buy a van, there are a few further things you need to know. 

Vans are built to a price, and that normally means cheap. Although some vans come with a 5-star safety rating, some do not, and due to maximising cargo space, might be very unsafe in a head-on collision. Please consider what your personal safety is worth. In Australia, vans were not required to have stability control (reduces the chance of rollover in a poor traction situation) until November 2017, so consider this when buying 2nd hand.

Vans are not cars. Thus, comfort, aesthetics, and multimedia will not be of the same standard. A van is designed to carry weight, and as such, the suspension will be hard and unforgiving in corners. When the van is empty, it leads to poor rear braking and front heavy handling. Drivers often sit ahead of the front tires, increasing the risk of cutting a corner early. Rear and side vision is restricted. Engine noise will be greater if the engine is below the driver’s seat.  

A great guide for buying 2nd hand vans can be found here

SUMMARY – Which Van

Which small van or which large van is the one that meets your business needs best?

If you own a delivery van, every friend and family member will want your help on the weekend.

That aside, it is a great representation of your business from both functionality and advertising.

Car Leasing and vehicle financing

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Your business needs a vehicle, and you do not have the spare cash to buy it outright. What options do you have? This guide will look at the options for car leasing.

WHY do you need a Car Lease?

Your vehicle represents your business and your key means of earning revenue. Unfortunately, few businesses have enough cash to buy a vehicle outright, so financing must be sought.

WHAT are my vehicle financing options?

Business loan – a financial institution lends you the purchase price. If your business is brand new, you will likely need to provide personal guarantees.

Credit Card – high interest and reduces your credit limit

Car Lease – essentially, you rent the car for a period with the option to buy at the end. Great for freeing up money that can be spent on other things

Hire Purchase – similar to lease, but the business owns the asset after the last payment is made

Chattel Mortgage – business car loan where the vehicle is security for the loan

Car Subscription Service –the car is provided for a fixed weekly fee with the option to swap or stop the subscription with short notice.

Long-Term Rental – fixed cost for a fixed term and may or may not include insurance, fuel, and maintenance.

HOW do I decide if car leasing is right for my business?

Leasing is suitable if a new vehicle is required every 3-5 years. Remember, a newer car will be more reliable and give a good impression of your small business. Some leases may have a balloon payment at the end of the lease, or you have the option to buy outright.

A car lease does not necessarily have to be a direct cost to the business. A small business owner may allow employees to salary package a novated lease.

 Put simply, a novated lease is a car finance package that allows your employer to make lease payments for you from your pre-tax income for the term of a lease whilst you are still employed. This has the effect of reducing your taxable income, which in turn, reduces your income tax. 

Most often, a lease will include running costs such as registration and servicing. The employee will be liable for Fringe Benefits Tax (FBT), which is based on a forecast that uses the value of the car and the distance of your business travel vs personal use to determine an amount.

If the business takes out the lease, there are two options, a Finance Lease or Operating Lease. With a finance lease, the vehicle is bought by a finance company and rented out to the lessee over a lease period. At the end of this period, the lessee must either purchase the car from the finance company by paying the residual value or lease the vehicle again. Operating leases are like a finance lease, except the lessee is not responsible for the residual value at the end of the lease – the car is handed back to the finance company. Some businesses with a high turnover of vehicles use operating leases to reduce administration costs. Operating leases can include all charges for a fixed monthly payment.

Your accountant can help you understand the costs of buying vs leasing.

HINT

For a business, depending on the circumstances of use and current legislation, lease payments are tax-deductible. The car leasing advantage is a more predictable cash flow. This vehicle financing method should not significantly affect the small business’s borrowing power for other purposes. The lender may claim the GST on the car’s purchase price if you are eligible. Only the vehicle’s price, exclusive of GST, is financed, lowering monthly payments.

When deciding, do not take the first deal offered to you. Different companies will offer different prices. Make sure the leasing company is reputable, and last but not least, be realistic about how much you can afford each month.

SUMMARY – compare companies for car leasing

Car leasing is a cost-effective way to get your business mobile without borrowing money. Ensure your business or individual can support the payments and that you compare leasing companies to get the best deal.

Car Expenses

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Work-related car expenses are among the simplest business expenses that can be claimed against your tax bill, thus saving you money. However, claiming does require some discipline. There are different methods like the ATO cents per km and logbook methods to choose from.  This guide will help you decide which car expense deduction method is right for your small business.

A car expense is a cost associated with the running of a car and can include fuel, tyres, servicing, repairs, insurance, tolls, parking, registration, hiring, interest on vehicle loans, lease payments and depreciation. A work-related expense is one that is incurred whilst performing your job.

WHY should I bother?

To claim a motor vehicle expense, you must be able to provide the Australian Tax Office (ATO) a sound justification for the kilometres that you travelled for work purposes. Unfortunately, just because you have a work vehicle that may even advertise your services on the side, it does not mean you can claim 100% of its costs.  The ATO is looking to understand how much you used this vehicle for business purposes versus private usage. So, unfortunately, the trip down to the beach in the ute is unlikely to be a tax deduction.

When you add up the costs of owning and running a vehicle, these costs can run up to hundreds of dollars a week. Over a year, that is thousands of dollars.  If some of this can be claimed, it is much better in your pocket.

WHAT can I claim as car expenses?

Claimable work travel includes:
  • Travel between work locations
  • Travel to a customer
  • Travel to pick up work equipment or supplies
  • Travel to work-related conferences and training courses

Travel from your home to work is not a tax deduction. This includes travel where you may do minor work-related tasks such as collecting mail. Travel from home to work can be claimed where:

  • You are a home-based business, so any business travel can be claimed such as visiting the bank or accountant.
  • You need to transport bulky items to and from their usual place of work where there is no reasonably secure storage provided on-site. For example, a tradie van or ute contains the tools of the trade.
  • You need to travel to a different location for business purposes, such as a customer meeting before or after work.
  • You are on-call, and thus your work has commenced before you leave your home. This would include emergency services, medical staff and after hour repair technicians.

HOW do I claim car expenses?

There are three ATO methods to claim motor vehicle expenses:

1. Cents per km method
2. Logbook method
3. Actual cost method

You may only use one method per year per vehicle.

If you are a Sole Trader or Partnership, you can choose between cents per km or the logbook method. However, if you own a motorcycle or a vehicle designed to carry either greater than one tonne or nine or more passengers, you must use the actual cost method. Thus, if you are a tradie with a one-tonne, ute you must keep actual records all year long.

If you are a Company or Trust, you also must use the actual costs method.

Cents per kilometre method

Every year you can claim up to 5000 kilometres per car based on a cents per kilometre deduction. For the 20/21 tax year, this rate is $0.72 per km. You must provide electronic or written evidence such as a diary to substantiate your kilometres travelled. We suggest you record the date, starting and ending kilometres and reason for travel. If you made a business trip in the 20/21 tax year of 32km, you could claim 32 x $0.72=$23.04.

Logbook method

The logbook method is a means to calculate the percentage of business travel versus private travel. It requires you to keep an electronic or written logbook per car for a single 12-week period within the taxation year.

As a separate exercise, you must record all your car-related expenses for that income year such as fuel and servicing expenses. Although we don’t recommend it, costs can be estimated based on odometer readings.

If over the 12 weeks you travelled 10,000 k kilometres and 6,000 were for business, then your business usage would be 60% (6,000/10,000). If your car expenses, including depreciation, were $9,000 for the income year, you could claim $5,400 ($9,000 x 60%).

The ATO states your logbook must include:

  • when the logbook period starts and ends
  • the vehicles odometer readings at the beginning and end of the logbook period
  • the distance the car travelled during the logbook period
  • kilometres travelled for each journey. If you make multiple journeys on the same day, you can record them as a single journey
    • reason for the trip (business reason or private use)
    • date of the journey
    • odometer readings at the beginning and end of the trip
  • the odometer readings at the start and end of each subsequent income year your logbook is valid for
  • the business-use percentage for the logbook period
  • the brand, model, engine capacity and rego of the car.
Actual cost method

The actual cost method requires you to keep track of every journey and every cost for that vehicle whilst it is owned by the business. As part of this process, you must keep the same sort of records as per the logbook method, but for 52 weeks or the time you have owned the vehicle. The costs for the year, including depreciation, can then multiply by your actual business use percentage to work out the deduction you can claim.

If you provide a vehicle to an employee or a spouse, tax implications are best discussed with a tax accountant.

HINTS

At the time of writing, the government provides a tax incentive to write a car off in the current financial year via temporary full expensing.

If your employee uses their own car for your business, your business can claim a deduction for any motor vehicle allowances or reimbursements you pay them for their costs, such as the cost of fuel.

There are various smartphone applications available to help you keep track of vehicle expenses, just search car logbook apps in your app store.  Some of these will use GPS tracking to make your input easier. The ATO also provides a handy app to keep track of vehicle trips and other business expenses and income.

If using the logbook method best not to include your 4-week driving holiday as part of the 12 week calculation period.

Information on buying vs leasing can be found here.

A guide to buying a van can be found here.

SUMMARY – work-related car expenses

Business use of a vehicle is tax-deductible.  There are three methods to claim a deduction; the choice depends on your business structure and the type of vehicle you use. Accurate record-keeping is important and will make your life so much easier come tax return time. If in doubt about anything discussed in this guide, we recommend you contact your accountant or seek clarification from the ATO

Expense management

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If you have employees, chances are they will spend money that they will claim back from the business.  Is the $200 bottle of wine an acceptable expense?  Is there an easy and quick way to process those expenses? This guide will look at how you can use expense management software to improve employee productivity and ensure your records are more accurate.

Expense management refers to the systems deployed by a business to process, pay, and audit employee-initiated expenses. This most likely will include policies and procedures that govern such spending, as well as the technologies and services utilised to process and analyse the data associated with it. Expense management software helps simplify this.

WHY consider Expense Management Software (EMS)?

Imagine you leave a restaurant, open an app on your smartphone, take a photo of the receipt, select the applicable expense item, and submit for approval and payment. You are done in less than a minute.  Why? – Because EMS cuts down manual processes, it is easy and fast for both the employee and employer.
Predominately being cloud-based solutions make the software affordable.

What is the difference between manual vs automated expense control?

Advantages of automated expense control:
  1. Productivity. Time and money lost due to misplaced receipts, forgotten expense approvals, and error-prone manual data entry, can put a significant drain on employee productivity and morale. Expense management software can curb these issues and increase efficiency.
  2. Captures GST.  The GST on each receipt can be accurately captured for allowable credits (talk to your accountant to understand what is allowable, for example, entertainment is not)
  3. Automatic integration.  Allows expense data to be loaded straight into your accounting package without any manual processing.
  4. Analyse spending. The ability to track spending by expense category, unit or vendor provides insight into spending trends and identifies areas for cost savings. Organisations can improve their cash flow cycle and forecast for future expenditures.
  5. Compliance. Internal policies, as well as external government and tax regulations, can cause non-compliance risks for a business. Expense management systems help reduce risks by evaluating expense reports against internal and external regulations.

How do I select an expense management system that is right for me?

Features you should evaluate include:
  • Accounting integration – Many systems integrate with popular accounting packages such as Xero and MYOB allowing for easy export of reports and eliminating the need for manual data entry. Be sure to read our essential guide on Accounting Software.
  • Expense compliance – Having some spending policies is a good idea, like a meal allowance whilst traveling. Will the software enforce spending policies and assist with fraud detection flagging expense overruns, duplicate expenses, missing documentation, and so forth?
  • Car mileage – Ability for an employee to track kilometres traveled for a work trip using their car.
  • Approval – Does it streamline the review and approval process by enabling you to approve based on expense type and other variables?
  • Analytics reporting – Will reports help forecast and budget for future expenses, identify spending trends, and highlight cost savings opportunities?
  • Automatic expense import – Do you want it to connect to email accounts and credit cards, allowing users to pick and choose charges to add to expense reports?
  • Smartphone receipt capture – Enables users to scan, email, or take a picture of receipts for easy submission.
  • Direct deposit – Do you want it to link directly to employee bank accounts for quick and easy expense payments.

Summary – photo receipts and accounting software integration

There can be some very fancy features offered from the expense software vendors but in the case of the small business, we recommend you go with the software that offers the basic features like uploading photos of receipts and accounting package integration to minimise costs.  You may also find your accounting package either has this feature built-in or an add on module can be purchased.

Courier options for small business

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Lots of small businesses are not in the delivery business indeed most don’t even sell a product, but from time to time you may need to get a document or parcel across town or interstate. This guide will look at courier type options you have to get a document, a parcel or even a large machine from A to B.

A Courier company is one which delivers messages, packages and mail and is known for their speed, security, tracking service and specialisation.
A Taxi truck is a truck with a driver that can be hired.

If you are looking for an ongoing logistics solution see our guide on freight solutions– delivering to the customer.

WHY should I use a courier or taxi truck?

Your time can be better spent than doing a one-off delivery.  Although freight charges in Australia keep going up it can still be quite inexpensive to have an item delivered.

WHAT are my choices to have something delivered?

First, you need to know two things:

  1. How urgent is the delivery?  Is the delivery time critical like a blood delivery or an important contract? If it is not critical is delivery ok in a couple of days? Put very simply, the faster the service the higher the cost.
  2. How big and heavy is the item? If you want to move a shoebox-size parcel then you will have lots of easy choices but moving something the size of a car can be a little more complicated. Note that some restricted items like most liquids require specialist transport and if something is highly valuable you may wish to make special arrangements.

Your simplest choice is to visit Australia Post where you can organise a few days or next day delivery for standard items.

In most capital cities in Australia, bicycle couriers are available to deliver documents and small parcels quickly, such as zoom2u.

Your next choice is to use a courier company who will arrange pick up and delivery of items either locally or interstate. The big advantage here is they will come to your premises.

Larger items can be ferried using a taxi-truck business whom will have various sized trucks to move your freight from A to B, such as Allied Express.

Valuables can be moved by a Precious cargo specialist who should also offer full liability, like Armaguard.

International freight can also be done through Australia Post including priority envelopes otherwise talk to an international specialist like DHL.

HOW do I pick a courier company?

Australia Post has a handy postage cost and delivery calculator https://auspost.com.au/parcels-mail/calculate-postage-delivery-times/#/.  They also sell parcel post and express satchels in 10 packs to save visiting the post office every time.

To compare courier costs, you can visit these comparison sites to get instant quotes
Compare couriers
Parcel 2 courier

HINTS

Couriers charge by both volume (dimensions added up) and weight.  If you have a light bulky item you will pay based on the volume.  If you have a tiny heavy item you will be charged by the weight.

Parcel tracking is a great way to understand if the receiver has received that urgent package.

SUMMARY – delivery on time

Your time is not well spent delivering a parcel to the other side of town. Delivery costs increase the faster you want something delivered with overnight being a sweet spot between cost and time. Competition means you can get the best price simply by visiting a comparison website.