Claiming Work Related Car Expenses

Do you use your car for work related travel?

If you answered Yes to above question, then you must read this.

You can claim deductions for use of personal car if you use your car for work.

As of 2016 financial year only 2 methods can be used for claiming work related car expenses.

Work Related Car Deductions

Only two methods are available now to calculate car expense claims:

• The logbook method, and
• Cents per kilometer method – A change has been made to this method.

Cents per KM method

In previous years, your car’s engine capacity would determine the rate for claiming cents per km. 2016 onward the ATO has one fixed rate of 66 cents per km for all cars regardless of engine capacity. This limits the dollar value of the deduction available under this method to a maximum amount of $3,300.

• Capping of 5000km per year using this method regardless of the kilometers traveled for work purpose.
• No log book or receipts required, though you need to justify the claim and show how you reached the number of kilometers claimed.
• ATO can ask you to explain how you calculated your claim and how the use of your car was work related.

Example:

Melissa is a Sales Consultant and is required to regularly visit clients using her own car. She took 4 weeks annual leave in the financial year. Each week she drives approximately 200 km visiting clients using her own car and isn’t reimbursed by her employer.

Melissa can claim a deduction of $3,300 i.e. 5000 Kms x 66 Cent per km.

Though Melissa traveled 9,600kms (48 weeks x 200kms) for work but her claimed is limited to 5000 kms due to the method used for claiming work related car deduction.

Car Logbook Method

• You must keep a logbook for 12 continuous weeks per car.
• You must own the car
• Log book is valid for 5 years per car. New log book is required if car changes during 5 year period.
• Record all business trips and all personal trips in your car logbook
• Keep receipts for all expenses related to your car for 5 years, including
  o Fuel
  o Registration
  o Insurance
  o Service and repairs
  o Interest on loan – if car is purchased through loan.
  o Depreciation – maintain the tax invoice of car purchase.
  o Other running costs – such as car wash, Tyre replacement etc.

Your tax agent will calculate business percentage from the entries in your log book.

Example –

At the end of financial year, Melissa’s log book shows she traveled a total of 10,000 kilometers, of which 6,000 were for business.
To calculate business percentage of total car use, Melissa made the following calculation:
6,000/10,000 × 100 = 60%
Melissa’s total car running expenses, including depreciation, are $10,000 for the financial year.

To work out how much she could claim, Melissa did following calculation:

$10,000 × 60% = $6,000

Which method is best for me?
If you drive your car for more than 5000kms for work use, it is worthwhile to maintain a log book. At the tax time, your tax agent will calculate using both methods and use the method that will give you maximum deduction.

Point to be noted:

You cannot claim the cost of traveling between your home and your place of employment or business, this is classified as personal travel. However, if your home is your place of business, you can claim the cost of trips you make between your home and other places, if your travel is for business purpose.

When choosing a claim method, you:

• can choose the one that gives you the best result if you satisfy the method’s requirements
• can use different methods for different vehicles
• can change methods from year to year
• Must keep records.

When you can 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
• deliver items or collect 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)
• Perform itinerant work.

For further assistance call Expert Tax on 0449 952 855 or you can contact us by sending a query.

You can also email us your query at info@expert-tax.com.au, we will endeavor to reply to your email as soon as possible.

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