You can claim a deduction for work-related car expenses if you use your own car in the course of business or performing your job as an employee. For example; carrying bulky tools or equipment, attending conferences and meetings, delivering items or collecting supplies, travel between two separate places of employment or travel to a client’s premises.
You have a choice between four methods. If you qualify to use more than one, you can choose the method that gives you the largest deduction. Your options are;
– Cents per kilometre
– 12% of original value
– One-third of actual expenses
Cents per kilometre
Using this method, your claim is based on a set rate (dependent upon your car’s engine capacity) for each business kilometre travelled up to a maximum of 5,000 businesses kilometres per car, per year.
You do not need written evidence when using this method, however, you need to be able to show how you worked out your business kilometres.
12% of original value
To be eligible to use this method, you must have travelled more than 5,000 business kilometres during the income year. If you used your vehicle for only part of the year, you need to justify that it would have travelled more than 5,000 business kilometres. As the method title suggests, your claim is based on 12% of the original cost of your car or 12% of its market value at the time you first leased it. You can only claim up to a maximum 12% of the luxury car limit which is currently set by the ATO at $57,466. This method also does not require written evidence, however, you need to keep a record of how you worked out your business kilometres.
One-third of actual expenses
As with the 12% of original value method, to be eligible to use the one-third of expenses method, you must have travelled more than 5,000 business kilometres during the income year. If you used your vehicle for only part of the year, you need to justify that it would have travelled more than 5,000 business kilometres. Your claim is for one-third of all your car expenses, including private costs but excluding capital costs such as purchase price, principal on any money borrowed or modification/improvement costs. For fuel and oil costs, you can keep receipts to work out the amounts or you can estimate them based on odometer records that show readings from the start and the end of the period you had the car during the year. You will need written evidence for all the other expenses for the car, such as interest on a loan, registration fees, insurance and repairs as well as records that show the car’s engine capacity, make, model and registration number. Additionally, you may need to show how you worked out your business kilometres and any estimates you made.
Your claim using the logbook method is based on your business use percentage of the vehicle. Expenses that can be claimed under the logbook method include running costs and decline in value. To work out the business use percentage of your vehicle, you need a logbook and the odometer readings for the logbook period. As with the one-third method, you can claim fuel and oil costs based on actual receipts or you can estimate the expense based on odometer records that show readings from the start and end of the period. For all other expenses, you need written evidence.
A logbook is valid for five years and must cover at least 12 continuous weeks. The logbook must show; when the logbook period starts and ends and the corresponding odometer readings, total number of kilometres travelled during the period, total number of business kilometres and the business use percentage. Each business trip in the logbook must show the date, odometer readings at beginning and end, kilometres travelled and reason for the trip. These records must also show the make, model, engine capacity and registration number of the vehicle. To make life simple, a vehicle logbook can be purchased from most newsagents and post offices or if you are technically minded there are some great new apps you can download.