What is a fleet?

A fleet moves people, tools and goods reliably. Dedicated vehicles cut downtime and keep staff mobile; bulk purchasing, standardisation and centralised maintenance lower the cost per vehicle; branded vehicles double as mobile marketing; and lease and fleet programs let you scale the fleet up or down with demand. Leasing can also transfer residual and remarketing risk to the lessor.

Fleet composition is driven by the work. Trades and service businesses run utes, vans and service vehicles; delivery and logistics operators run panel vans, courier vans and small trucks; construction and agriculture businesses run trucks, excavators and tractors, often financed as equipment; and corporate fleets provide cars for sales staff and executives, sometimes through novated arrangements.

Under an operating lease the lessor owns the vehicles, maintenance and administration are often bundled into fixed payments, and at the end of the term, typically two to five years for light vehicles, you return the vehicles or renew. A finance lease usually runs two to five years and ends with a residual the lessee is responsible for, normally by offering to buy the vehicle, so the lessee carries ownership risk. A chattel mortgage gives you title from day one, with the lender holding a mortgage over the vehicle, over a term of one to seven years.

Hire purchase works in a similar way except that title passes to you only after the final payment. A novated lease is a salary sacrifice arrangement for an employee's car in which the employer takes on the lease obligations, and it brings fringe benefits tax into the picture.

Leasing keeps the upfront outlay low with periodic payments. Under AASB 16 a lessee brings almost all leases onto the balance sheet as a right-of-use asset and a lease liability, apart from limited exemptions for short-term and low-value leases, so off-balance-sheet treatment is no longer the general position. The lessor keeps title and often bundles maintenance, and on an operating lease also bears the residual risk. At the end of the term you return, renew, buy or re-lease.

Buying usually means a higher upfront cost or deposit, and the vehicle sits on the balance sheet as an asset you own rather than as a right-of-use asset. Maintenance is your responsibility unless you outsource it, you claim depreciation and interest deductions plus GST input credits on the purchase, and you carry the resale risk. At the end you keep, sell or trade in the vehicle. Compare the two on total cost: purchase price plus interest, running and disposal costs, less the residual value.

If your business is registered for GST you can generally claim input tax credits on a vehicle you buy, apportioned where there is private use, while on a lease GST is charged on each payment. For a vehicle that counts as a car, both the GST credit and the depreciable cost are capped at the current car limit, though vehicles built to carry more than one tonne sit outside it, so check the current limit with the ATO. Under a chattel mortgage or hire purchase you claim depreciation and the interest portion of repayments, and operating lease payments are usually deductible as an operating expense.

Sole traders and partners, as individuals, substantiate business use with a logbook or the cents-per-kilometre method, while a company or trust claims actual running costs and treats private use by employees or directors as a fringe benefit. FBT is valued under the statutory formula or operating cost method, so logbooks, odometer readings and FBT records matter. Check current ATO guidance or talk to your accountant.