Claiming Motor Vehicle Expenses

By Rebecca Macdonald

From 1 July 2015, the ability to claim tax deductions for motor vehicles has changed for certain taxpayers. As a result of these changes it is a good idea to check that you are still getting the best tax deductions for your motor vehicle.

What are the changes?

The changes affect employees making work related car expense claims, sole traders and individuals in a partnership.  The reduction in the cents per kilometre rate affects all tax payers using this method to claim motor vehicle expenses.

All motor vehicle claims using cents per kilometre method will have the rate of 66c per business related kilometres up to a maximum of 5,000 kilometres. Previously this was between 65 cents and 77 cents depending on engine size of the car.

The 12% of actual cost can no longer be used.

The one third of actual expenses can longer be used.

The log book method can still be used.

How do you get the best deduction?

Your best option is to keep a log book. This will ensure the deduction using both available methods can be calculated and you can choose the option that provides the best tax deduction.

It is also important to keep all of your details in relation to expenses for the vehicle including:

  • Purchase Cost
  • Fuel Expenses
  • Insurance
  • Registration
  • Repairs and Maintenance

Keeping a log book and expenses

Your log book needs to be kept for 12 consecutive weeks and this period should be representative of your travel throughout the year. This log book is then valid for a period of five years as long as your business use does not substantially change.

The ATO has listed the following requirements of your log book:

  • Date the log book begins and ends.
  • The car odometer readings at the start and end of the log book period.
  • The total number of kilometres travelled during the log book period.
  • For each journey you will need to record the following:
    – kilometres travelled;
    – start and finishing times;
    – odometer readings at the beginning and end; and
    – reason for travel.
  • The business-use percentage for the log book period.
  • The odometer readings at the start and end of each income year you use the log book.

Making it Easier

Gone are the days where you need a manual log book in the glove box, filled out after every trip and a car floor full of petrol receipts!

There are a range of smart phone apps that satisfy the requirements of the ATO. The apps will track your travel through your smart phone and some of them will even allow you to store all of your vehicle expenses, such as petrol receipts, in the app. This will ensure you never miss a deduction!

Want to know more?

If you would like to know more about the issues raised in this article, please contact Rebecca Macdonald our Business Advisory Director for assistance.

An Important Message

While every effort has been made to provide valuable, useful information in this publication, this firm and any related suppliers or associated companies accept no responsibility or any form of liability from reliance upon or use of its contents.  Any suggestions should be considered carefully within your own particular circumstances, as they are intended as general information only.



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