Selling Your Car in Adelaide: Let's Talk About Taxes!

Thinking of selling your car in Adelaide? That’s great news!
Letting go of your old car can feel like a big relief — and getting some quick cash in your pocket is always a bonus.

But before you close the deal and start planning how to spend that money, there’s one thing you might not have thought about yet: tax.

Yep, it’s not the most exciting topic, but understanding how selling your car could affect your tax situation is something you’ll want to be clear on before signing anything.

It’s common to feel a bit confused about whether your car sale will even touch your tax return. Most people don’t think about it! But trust us, understanding a few key things upfront can save you a lot of headaches down the track with the Australian Taxation Office (ATO).

Will Your Car Sale Mean a Tax Bill? Here’s When It Might

t’s a fair question — could selling your car land you with a tax bill? In most cases, the good news is no, it won’t. Most personal car sales are tax-free. But there are a few situations where the ATO might want to have a word.

Selling a Personal Car for a Big Profit (The “Investment” Rule)

Any profit we make when selling our daily driver, family sedan, or even a weekend cruiser is typically exempt from capital gains tax (CGT). This is due to the fact that motor vehicles that are primarily used for recreational purposes are typically exempt from CGT.

The worst part, though, is this: If you purchased the car with the intention of making money, the situation is different. It could be a rare classic, a collector’s item, or a component of a business endeavor. The ATO may consider this to be a taxable event if you later restore it and sell it for a sizable profit. The purpose of owning the vehicle is crucial in this situation.

Business Vehicles & Depreciation

If your car’s been pulling double duty for your business – whether you’re a sole trader, a small business owner, or it’s a company vehicle – things get a bit more intricate. You’ve probably been claiming depreciation deductions on it over the years, which reduces its “written-down value” (its value for tax purposes).

When you sell a business vehicle, any money you get above that written-down value might be considered a taxable profit. This is often called “recaptured depreciation.” The ATO is pretty thorough with business assets, so having clear records of its original cost, all the depreciation you’ve claimed, and the final sale price is absolutely crucial for your tax reporting.

Cars You’ve Inherited or Been Gifted

There may be special tax implications when selling a car that you inherited or received as a gift. The market value of the car at the time of purchase—referred to as its “cost base” for CGT—often determines the tax situation. Any profit you make from selling it for more than that amount might be subject to taxes. Although it’s a detail that’s easy to miss, it’s worth looking into to prevent a surprise.

Good News! When Your Car Sale is Usually Tax-Free

Take a breath! Not every car sale comes with a tax bill. Most private car sales here in South Australia, and across Australia, are actually exempt. You can generally relax if:

You Sell at a Loss

If you end up selling your car for less than what you originally paid for it, that’s considered a capital loss. For personal items like your everyday car, a capital loss is generally disregarded for CGT. So, no tax to pay, and you can’t claim a deduction for the loss either.

It’s Your Standard Personal Car

As we touched on, if your car has been primarily for personal use – driving to work, family trips, grocery runs – and you didn’t buy it with the sole intention of making a profit, any money you make from its sale is typically exempt from Capital Gains Tax. This covers the vast majority of private car sales in Adelaide.

It’s a Well-Depreciated Asset

Think about that old sedan that’s clocked a gazillion kilometres, or the ute that’s taken a fair few knocks over the years. These well-loved vehicles often have minimal taxable value left, especially after years of use. If the sale price is less than or equal to its original purchase price (for personal use vehicles), there’s no taxable gain to worry about, and therefore, no tax.

Digging Deeper: Selling a Car Used for Business

If your vehicle was a vital part of your business, selling it needs a bit more attention to tax rules:

Understanding Taxable Profits

The catch is that if you sell a business car for more than its “written-down value”—basically, the amount it is worth on your books after depreciation is claimed—that additional amount is typically regarded as a taxable profit for your company. This must be included in your assessable income for that fiscal year..

Why Records Are So Important

Having precise records is your best friend. Keep everything: the car’s original purchase price, all maintenance receipts, significant upgrades, and, crucially, a solid record of all the depreciation you’ve claimed over its business life. These figures are vital for working out its written-down value and, ultimately, whether you’ll have a taxable gain or loss when you sell.

Your Logbook: The Business Car’s Best Mate

If your car was used for both work and personal trips, a meticulous logbook is non-negotiable. This document precisely proves the percentage of business use versus personal use. Not only is it essential for backing up your past depreciation claims, but it’s also critical for accurately calculating any taxable gain when you sell. Without it, claiming deductions or challenging ATO assessments becomes incredibly difficult.

GST for Business Car Sales in SA

The sale price of the car must typically include GST if your company is registered for the Goods and Services Tax. Even if you sell it to a private buyer, this still holds true. Conversely, you would have claimed the GST credit on the purchase price of the car when you first purchased it for business purposes (up to a certain “car limit”). Your income tax computations are not affected by these GST considerations.