Do I pay tax when I sell my car? CGT, GST and the ute question

If you’re selling a car you own and use privately, there’s usually no tax on the sale. The ATO says your car is exempt from capital gains tax (CGT), and GST isn’t payable when you sell a privately owned asset.

Tax usually comes into it in only a few cases. These are when a ute may not count as a car under the ATO’s definition, when the vehicle was used in a business or claimed as a work expense, or when a GST-registered business sells a luxury car. We’re a licensed motor dealer, not tax advisers. This guide sets out what the ATO says, where the grey areas are and which questions to take to your accountant.

Is there capital gains tax when you sell a car?

Not on a car as the ATO defines it. The ATO’s list of CGT assets and exemptions says your car or motorcycle is exempt from CGT. It defines a car as “a motor vehicle that carries a load of less than 1 tonne and fewer than 9 passengers”.

That covers most sedans, hatchbacks, wagons and SUVs. Because the car is exempt, a gain or a loss on the sale is generally ignored for CGT, whether you sell for more or less than you paid.

The exemption is only about CGT. It doesn’t settle GST, or the income tax side of a vehicle you’ve claimed as a business or work expense. The sections below cover both.

Keep a copy of your bill of sale anyway. It records the date and the price, which is what an accountant will want to see if a question ever comes up.

Is your ute a “car” in the ATO’s eyes?

Not always. The ATO’s test is the load the vehicle carries, and the sensible starting point is the manufacturer’s rated payload, not what you’ve happened to have in the tray.

Some dual-cab utes, including versions of the Toyota HiLux, Ford Ranger, Isuzu D-MAX and Mazda BT-50, have payloads near or above 1 tonne. Payload can also differ between variants of the same model, depending on things like the cab, the body and the drivetrain.

So don’t assume your ute is CGT-free, and don’t assume it isn’t. Here’s how to check:

1. Pin down your exact variant: model, grade, cab style, body (tub or tray) and 2WD or 4x4. Your rego papers usually show the VIN if you need to confirm it.
2. Find the manufacturer’s published payload figure for that variant. A dual-cab seats five, so the passenger part of the test isn’t the issue: the payload is.
3. If the payload is close to or above 1 tonne, take the figure to your accountant and ask whether the car exemption applies.

If your ute falls outside the definition, the CGT car exemption doesn’t cover it. Whether that leads to any tax depends on your circumstances, such as how you used the ute and what it cost you. That’s a question for your accountant, not a rule of thumb. Our guide to selling a used Toyota HiLux covers this for HiLux owners, and our sell my ute page explains how we buy utes.

Do you charge GST if your business used the vehicle?

It depends on whether your business is registered for GST and how the vehicle was used. The ATO’s page on disposing of a motor vehicle sets out the rules.

• Registered for GST, vehicle used in the business. If the vehicle was used solely or partly for business, you generally have to account for GST on the sale. That applies whether you sell to a dealer, trade it in or sell to a private buyer.
• Registered for GST, vehicle never used in the business. The ATO’s wording is that “GST is not payable on the disposal of privately owned assets”. Its example is a sole trader selling a car that wasn’t used in the business and on which no GST credit was claimed.
• Not registered for GST. There’s no GST to charge on the sale. The income tax side can still matter if you claimed depreciation, so read the accountant checklist below.
• Personal car, no business use at all. No GST.

A ute used for work during the week and for weekend trips is still used partly for business. If your business-use percentage changed over the years, ask your accountant whether any GST adjustment applies to the sale.

If the vehicle belongs to a business, our page on selling a company car covers who signs and how the sale works with us.

How much GST is in the price? A worked example

When a GST-registered business sells a vehicle it used, the GST is generally one-eleventh of the sale price. The ATO says the sale goes on your business activity statement (BAS) at G1 (total sales), with the GST at 1A.

Here’s a hypothetical example. The numbers are made up to show the arithmetic. They aren’t a valuation of any vehicle.

Mia is a GST-registered electrician. She used her dual-cab ute only for her business and agrees to sell it for $44,000.

Three things Mia’s sale shows:

• If you agree a price without mentioning GST, the GST comes out of it. One-eleventh of $44,000 is $4,000, whether or not anyone said “including GST”. If you mean $44,000 plus GST, say so and put it in writing before you agree.
• The buyer changes the conversation, not the GST. A GST-registered dealer may be able to claim a GST credit on the purchase. A private buyer can’t claim it back, but Mia owes the same $4,000 either way.
• GST is only one question. Mia’s accountant would also look at the depreciation she claimed on the ute, because the sale price can affect her income tax.

Trade-ins, dealers and tax invoices

The ATO treats a trade-in as a sale. If you’re GST-registered and the vehicle was used in your business, the trade-in value includes GST in the same way. A hypothetical $12,000 trade-in, for example, is $10,909.09 plus $1,090.91 GST. The dealer may ask you for a tax invoice showing the trade-in value and the GST.

A common sticking point is a trade-in figure that nobody describes as including or excluding GST. If your business is registered, ask the dealer which it is before you sign. Keep the trade-in and the new purchase as separate entries in your records, because one is a sale and the other is a purchase.

The same questions apply when you sell outright to a dealer instead of trading in. Ask whether the offer is GST-inclusive, and ask your accountant whether you need to issue a tax invoice for the sale.

If you’re selling a personal car, a tax invoice doesn’t come into it. A bill of sale or written receipt is the right record.

Does luxury car tax apply when you sell?

Not if you’re a private seller who isn’t registered for GST. The ATO says luxury car tax (LCT) may apply when a GST-registered seller sells a luxury car, so it’s a question for businesses, not for people selling their own car.

LCT is worked out against a value threshold that the ATO publishes, and the threshold changes over time, so we don’t quote a figure here. If LCT could be relevant to you, check the ATO’s current luxury car tax rates and thresholds.

If your business is GST-registered and is selling a prestige car it has used, ask your accountant whether LCT applies to that sale, alongside the GST question. Raise it before you agree a price, because it can affect what the business keeps.

Which of these applies to you?

Find the row closest to your situation. Where it says “accountant”, that’s the honest answer: the outcome depends on details only your records show.

What to take to your accountant

If any row above sent you to an accountant, take these with you.

• The purchase contract or tax invoice, showing the date and price you paid
• Whether you claimed a GST credit when you bought the vehicle
• Your depreciation records, including any instant asset write-off claim
• Your logbook or business-use percentage
• For a ute or van, the manufacturer’s payload figure for your exact variant
• The offer, sale contract or bill of sale, with the date, the price and whether it includes GST
• A copy of any tax invoice you issue to the buyer

And these questions:

1. Is my vehicle a “car” under the ATO’s definition, so the CGT exemption applies?
2. Do I need to account for GST on this sale, and is any adjustment due for private use?
3. Should I issue the buyer a tax invoice?
4. I claimed depreciation on the vehicle. Does the sale create a balancing adjustment, and how much is it?
5. Does luxury car tax apply?
6. Which BAS period does the sale belong in?

If you wrote off the whole cost of the vehicle in the year you bought it, ask specifically how the sale price is treated. The same goes for employees who claimed the car’s decline in value under the logbook method.

Selling your car or work vehicle to us

A tax question is no reason to hold off getting an offer. An actual offer gives your accountant a real figure to work with on GST or any balancing adjustment.

Sell Your Car Australia is the trading name of Autohaus Australia Pty Ltd, a NSW licensed motor dealer (MD 077404, ABN 54 618 813 737). The business is run by a valuer who has priced cars since 1992 and supplies dealerships nationwide. We buy cars, utes, SUVs and 4WDs 2021 or newer with 100,000 km or less. If yours is older or has done more, send it through anyway and we’ll tell you straight away if we can help.

You get a genuine offer by phone from a licensed dealer, not an online estimate. If the vehicle is owned by a business or used in a GST-registered business, say so on the call and ask us whether the offer includes GST, then settle the tax questions with your accountant before you accept. Once you accept, a deposit is often paid the same day, and the inspection happens at a time and place that suits you. The balance goes into your bank account. We arrange collection anywhere in Australia, and only after you confirm the funds have cleared.

If there’s a loan or business finance owing, we deal with your lender directly to pay it out, then pay you any equity. That usually takes 2 to 3 business days to settle, and any negative equity has to be covered before settlement. Our page on selling a car under finance explains how it works.

Valuations are free with no obligation, and no fees are taken out of the offer. Start with a free valuation or call us on 1800 73 55 73.