Value Added Tax Consolidation Act 2010 section 62

Reduction of tax deductible in relation to qualifying vehicles

Section 62 provides for a clawback of VAT previously deducted on a qualifying vehicle where that vehicle is disposed of within two years or where business use falls below 60 per cent.

• Where an accountable person disposes of a qualifying vehicle within two years of purchase, intra-Community acquisition or importation, the VAT originally deducted must be reduced using a statutory formula based on the length of ownership.
• The formula is TD × (4 − N) ÷ 4, where TD is the VAT deducted and N is the number of days from acquisition to disposal divided by 182 and rounded down to the nearest whole number (capped at 4).
• A separate but identical clawback applies where the vehicle is used for less than 60 per cent business purposes in a taxable period, with N calculated from the date of acquisition to the first day of the taxable period in which business use falls below the threshold.
• In both cases, the clawback reduces progressively over four six-month intervals: 100 per cent if within the first six months, 75 per cent in the second, 50 per cent in the third, 25 per cent in the fourth, and nil after 24 months.