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A guide to the basics of tax time and motor vehicle deductions
Updated 10 Oct 2019
It’s tax time. Ugh. For many people that means a trip to the accountant/tax agent and a meeting that amounts to an hour of sitting with fingers crossed hoping the clever person on the other side of the desk can make some sense of the jumble of receipts and assorted dog-eared notes they’ve been handed.
Disapproving looks and the occasional sigh of despair are the distinguishing features of such meetings . . . or perhaps this just describes my annual tax-time trip of terror.
Whether your interactions with the number crunchers of the tax agent world are similar to this or not, the process of accounting for your income over the year is a task that cannot be avoided, so having a grasp on what expenses you can claim for is a useful bit of knowledge to possess.
One area that many of us can make claims for is travel and, more specifically, car-related expenses. If you are using your car to perform your job, these include expenses incurred when:
- travelling between different workplaces (for example, when you have a second job)
- travelling to work-related conferences, events or meetings
- delivering or collecting items or supplies as part of your work
- travelling from your normal workplace to one that isn't a regular workplace (such as a client’s premises) then back to your normal workplace or home
- you’re required to start your work at home and then travel to a workplace to continue that work
- performing itinerant work (that is where travel is fundamental to what you do).
- If you need to transport equipment that is required to do your job but which you are unable to leave at your workplace
What you can't claim
You can't claim a deduction for private use of your car, which includes the cost of driving between work and home. This rule also applies if:
- you’re carrying out minor tasks, such as picking up mail, for your employer when on your way to work.
- you have to drive between home and work more than once a day
- you are on call and have to go into work
- you work shift work or overtime
- your home is a place where you run your own business and you travel directly to a place of work where you work for somebody else
- you received reimbursement for expenses
How to calculate what you can claim
There are two ways for you to make a claim on car-related expenses: the logbook method and cents-per-kilometre method.
Cents per kilometre
- You can claim up to 5000kms of business travel per year at 68 cents per kilometre. Remember that you may need to provide evidence to show how you worked out your business kilometres (for example, a diary with records of your work-related trips).
- Using this method, your claim is based on the percentage of time you use the car for business purposes. You’ll need to track your expenses for at least 12 weeks and record information such as:
- when the logbook period begins and ends and the odometer readings at the start and end of those 12 weeks
- the number of kilometres travelled during the 12 weeks
- the business-use percentage for the logbook period
- For each journey you’ll need to note:
- the business reason for the journey
- start and end times of the journey
- odometer readings at the start and end of the journey
- total kilometres travelled.
- expenses include running costs but not improvement costs (such as tinting windows). You can claim fuel and oil costs (you’ll need receipts) or you can estimate the expenses based on odometer records.
Those are the basics when it comes to claiming deductions on your car. If you want to know more and get into the nitty-gritty, then be adventurous and visit the Australian Tax Office website.
Tax time can be a bit stressful, and you might just want to get it over with and move on with your life, but knowing what you are entitled to not only makes things easier, it means you could end up with more money in your pocket.
Keeping a logbook and keeping receipts might seem a little tedious, but giving up a bit of time to get the information right can pay off. And really, that’s not too taxing.
Jonathan has been writing about the auto industry for years and is particularly interested in the high-tech innovations sweeping the industry.
He’d love to own a Tesla Model S, but also adores anything with a V8 under the bonnet.
He has yet to decide between an EV or a Mustang for his next ride.