Car-related expenses are among the most commonly claimed tax return deductions in Australia, accounting for approximately 40 per cent of all work-related deductions.
However, I still find many clients are confused about what they can and can’t claim when it comes to their vehicles.
Most people understand that the car in question must be used for work purposes and that driving to and from work is generally not considered work travel (only in a few very unique circumstances are you able to claim this).
However, there are several other really important rules to keep in mind.
Is your vehicle actually a car?
The first thing you need to determine is whether or not your vehicle is classified as a car by the ATO.
A car is defined as a motor vehicle that is designed to carry both:
- a load of less than one tonne; and
- fewer than nine passengers.
If your vehicle is not a car, it’s considered an ‘other vehicle’. Other vehicles include:
- motorcycles
- vehicles designed to carry either:
- one tonne or more (for example a ute or panel van)
- nine passengers or more (for example a minivan).
Why is this important?
Well, if your car isn’t a car, you cannot use the cents per km method. You MUST complete a logbook and claim the work use of your car on the actual running cost of that vehicle.
What is a valid logbook?
A logbook must record a period of at least 12 weeks.
It must record all uses of the vehicle during that 12-week period, including personal use of the vehicle. It is also important that the 12 weeks represent the true use of the vehicle. You cannot pick a period where you are doing more business than usual for example.
There is so much that needs to be included in a logbook to make it valid that we have created a separate information sheet, to ensure you don’t miss anything. After all, we want to make sure that you claim everything you possibly can.
I can just claim 5000kms – I don’t need a record
If your car is a car, you may consider claiming based on the cents per km method.
Whilst it is true that you do not need to keep a logbook, you MUST still have a basis for claiming those kilometers.
A diary or app that records the kilometers travelled is a must. Remember, it is up to you to prove your claim if the ATO requests it.
What things can I claim?
- Fuel and oil
- Repairs and servicing
- Tyres
- Battery
- Interest if you have a loan
- Lease payments
- Insurance
- Registration and green-slip
- Depreciation
Other important things to know before you claim
You must own, lease or have a hire purchase agreement for the motor vehicle in your name if you want to claim a deduction for it. If you have a novated lease through your employer, you cannot claim any motor vehicle expenses in your tax return.
If you need a copy of our logbook spreadsheet, please get in touch and we will send it to you.
For any other questions, or to book your 2021 Tax Return appointment please call us on (02) 4920 7886.
