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Claiming Car-Related Expenses this Tax Season

With tax time coming up very soon, many of us will be looking towards our tax returns and working out what we can claim for this financial year. A very common area people claim deductions in is car travel and other vehicle-related expenses. While there are many options available for things to claim, the Australian Taxation Office (ATO) is increasing scrutiny on those making unsubstantiated claims. This means it’s especially wise to ensure what you’re deducting is allowed, and you’re able to back it up should the ATO come knocking. Here are a few car-related deduction “dos and don’ts” in the lead up to June 30.

What you CAN claim

Perhaps most obviously, you can claim deductions on your tax return if you use your car in the course of performing work duties, including attending work-related conferences or meetings away from your normal workplace. Also, if you travel directly between two separate places of employment (and one of the places is not your home), you are also able to claim your travel costs. Similarly, travelling from your normal workplace to an alternative workplace and back again is also allowed, as is travelling from your home to an alternative workplace, and then to your normal workplace. On top of all of these, if your job requires regular travel throughout the day (e.g. several trips to suppliers, clients etc.), your travel expenses can be claimed.

What you CAN’T claim

Before you get ahead of yourself, remember that you cannot claim a deduction for your normal daily commute between home and work. The only way you can successfully make this claim is in limited circumstances where you carry bulky items, tools or equipment that you are required to use for your work, and you cannot leave at your workplace. If part of your travel throughout the work day that you are looking to claim is private, you may only claim the work-related portion of the journey/s.

Also, you cannot claim a deduction for any car expenses that have been salary-sacrificed, or if you have been reimbursed for the expense/s.

How can you calculate your expenses?

There are two methods you can use to work out how much you should claim:

The cents per kilometre method allows you to claim a maximum of 5,000 business kilometres per car. The claim is based on 68 cents per kilometre, and you don’t need written evidence to make the claims. However, you do need to be able to demonstrate your calculations of the business-related kilometres travelled, which you may do so by retaining diary records of work-related trips.

Claiming using the logbook method is based on the business-use percentage of expenses for the car. These expenses include running costs and depreciation, but don’t include capital costs, such as the car’s purchase price, the principal on any money borrowed to buy it, or any improvement or modification costs (e.g. window tint).

You will need a logbook and odometer readings to work out your business-use percentage for the logbook period (which is a minimum continuous period of 12 weeks). You can claim fuel and oil costs based on your actual receipts, or you can estimate the expenses based on odometer records that show readings from the start and the end of the period you used the car during the year. Generally speaking, you will need written evidence for all other expenses. A few other notes are as follows:

  • Your logbook can be kept either electronically or on paper.
  • If you started using your car for work-related purposes less than 12 weeks before the end of the year, you can extend the 12-week period into the next financial year.
  • If you are using the logbook method for two or more cars, keep a logbook for each car and make sure they cover the same period.
  • Your 12 week logbook is valid for five years, and you must record a new odometer reading at the end of every financial year. Keep in mind, though, that if your circumstances change and the logbook is no longer representative (e.g. you start a new job), you will need to complete a new 12 week logbook.

Do you want to maximise your deductions and minimise your tax liabilities? Be sure to book in with McKinley Plowman’s tax agents in Perth well in advance of June 30 to beat the rush! Contact us via our website, or give us a call on 08 9301 2200.

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