Yes, you can purchase a car in the name of your trust. However, whether you can claim a tax deduction for it is not a straightforward answer. It depends on how the car is used and the nature of your trust’s activities.
What Does Your Trust Do?
🔹 Investment Trust (Property or Shares):
If your trust is primarily used for passive income activities, such as holding rental properties or shares, then there is no clear business connection to justify claiming tax deductions for the vehicle. In this case, the car is likely to be used for personal purposes, which means deductions are generally not allowed.
🔹 Active Business Trust:
If the trust actively operates a business—such as a consulting firm, construction company, or retail store—then there may be a valid business reason for purchasing the vehicle. In this case, tax deductions may be available, provided the car is genuinely used for business purposes.
Fringe Benefits Tax (FBT) Considerations
Owning a personal-use vehicle in a trust can sometimes create additional tax reporting requirements because Fringe Benefits Tax (FBT) may apply.
If the trust provides a car to a trustee, employee, or beneficiary for personal use, the trust may be liable for FBT. This tax applies when a vehicle is used for non-business purposes, and it can significantly impact the overall tax benefit.
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