Driven to Deduct – Motor Vehicle Expenses

Driven to Deduct – Motor Vehicle Expenses

The most commonly claimed tax deductions are work-related expenses and around seven million people make related claims each tax year – with one of the most popular being motor vehicle expenses! Have you already jumped on the bandwagon? If not, it’s never too late to start!

“You must pay taxes. But there’s no law that says you gotta leave a tip.” [1]

When can you claim?

You can claim a deduction for work-related car expenses if you use your OWN CAR in the course of performing your job as an employee, for example, to:
• Carry bulky tools or equipment
• Attend conferences or meetings
• Delivering items or collecting supplies
• Travel between two separate places of employment (for example, when you have a second job)
• Travel from your normal workplace to an alternative workplace and back to your normal workplace or directly home
• Travel from your home to an alternative workplace and then to your normal workplace or directly home (for example, if you travel to a client’s premises)
• Performing itinerant (place to place) work

If you receive an allowance from your employer for car expenses, it is assessable income and the allowance must be included on your tax return. The amount of the allowance will usually be shown on your payment summary.

When can’t you claim?

Most people can’t claim the cost of travel between home and work because this travel is private. Travelling to your normal workplace is not deductible.


Calculating your deductions:

There have been some slight changes to work-related car expense deductions from 1 July 2015 to be aware of. Have no fear, the changes have streamlined your ‘road to reducing your tax’ so jump on board the methods and calculations which apply from and before 1 July 2015.

From 1 July 2015, the one-third of actual expenses method and 12% of original value method have been ABOLISHED.

The two methods available from 1 July 2015 are:
• Cents per kilometre method (with some changes)
• Logbook method (with no change to its rules)

Cents per kilometre method:

Gone are the days of separate rates based on the size of the engine. Under the modernised cents per kilometre method, individuals use 66 cents per kilometre for all motor vehicles for the 2015–16 income year. The Commissioner of Taxation will determine the rate for future income years.
• Your claim is based on 66 cents per kilometre for 2015–16 income year
• You can claim a maximum of 5,000 business kilometres per car
• You don’t need written evidence but you need to be able to show how you worked out your business kilometres (for example, by producing diary records of work-related trips).

Where you and another joint owner use the car for separate income-producing purposes, you can both claim up to a MAXIMUM of 5,000 kilometres.

Logbook method:

For this method, your claim is based on the business-use percentage of the expenses for the car.
• Expenses include running costs and decline in value but NOT capital costs (for example, purchase price of your car, the principal on any money borrowed, nor any improvement costs).
• To work out your business-use percentage, you need a logbook and the odometer readings for the logbook period. The logbook period is a minimum continuous period of 12 weeks.
• You can claim fuel and oil costs based on either 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 had the car during the year.
• You need written evidence for all other expenses for the car.

Be DRIVEN to DEDUCT and don’t hesistate to contact the experts at KMT Partners! So, all aboard the reducing tax bandwagon, you never how much your motor vehicle could save you come tax time. #GoodbyeTaxBill #DrivenToDeduct #TaxTips


Source: ATO

The information on this page was correct as at 5th May 2015.

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