How to claim Work-Related Vehicle Expenses

How to claim work-related motor vehicle expenses

How you used to claim

Traditionally there has been four methods of ATO approved motor vehicle expense claims up to 30 June 2015:

  1. Cents per km;
  2. Logbook method;
  3. 12% of the original value; and
  4. One-third of actual expenses incurred.

The new way to claim

That has all changed now with the new legislation passed on 30 November 2015.  This has reduced the options down to either one of the following:

  1. logbook method; or
  2. flat rate of 66 cents per kilometre method. Historically, when claiming motor vehicle expenses using the cents per kilometre method, the rates had varied according to engine size, and the maximum number of kilometres you could claim was set at 5,000kms.

From 1 July 2015, the flat rate of 66c/km will apply regardless of the engine size of your vehicle. The maximum number of kilometres you can claim remains at 5,000km. To make expense claims using this method, written evidence is not required, however, you will need to be able to show how you worked out your business kilometres.

If you have a larger car that is used primarily for business purposes, the logbook method is recommended.

When claiming under the logbook method, you will need to determine the business use percentage of the vehicle based on a logbook prepared over a 12-week continuous period; you can purchase these from stationery retailers or download one of the many apps available on both Android and iPhone.

 

The logbook method

Logbooks are valid for a period of five years unless your business use changes dramatically. Your logbook needs to contain the following information:

  • When the logbook period begins and ends;
  • The car’s odometer readings at the start and end of the logbook period;
  • Total number of kilometres the car travelled during the logbook period;
  • Number of kilometres travelled for each journey recorded in the logbook (if you made two or more journeys in a row on the same day, you can record them as a single journey). You will need to record the:
    • Start and finishing times of the journey;
    • Odometer readings at the start and end of the journey;
    • Kilometres travelled; and
    • Reason for the journey.
  • Business-use percentage for the logbook period; and
  • Odometer readings at the start and end of each income year you use the logbook method.

The 12 week period can cross over two financial years, provided the period is representative of your travel throughout the year. This means if you start your logbook late in May or early June, you can continue to record information into July through to September to cover the 12 weeks required.

The business percentage calculated for the 12 week period is applied against the running costs of the vehicle, the decline in value and any interest charges as a result of vehicle financing; i.e. fuel, oil, repairs & services, insurance and registration.

While it may appear to be a lot of information to retain for record-keeping purposes, the tax benefits are certainly worth it for vehicles used predominantly for business purposes.

If you require any assistance with determining which method you should be using or how this legislation impacts your tax position, please contact our office.

 

4 thoughts on “How to claim work-related motor vehicle expenses”

  1. Hi, I use my personal car for work purposes and receive a mileage allowed from work based off how many km’s I do – I keep a log book of this and submit the km’s prior to each pay. What are the additional expenses I can claim in my tax return? For example, can I claim for car washing? Am I correct in saying that my mileage allowance will be included in my taxable income when I do my tax return?

    1. Hi Tim
      Thanks for the question. In regards to the logbook you submit to your employer for kilometres, does this include your private kilometres in addition to the ones travelled for business purposes? To claim the additional expenses in your tax return, you will need to have a valid logbook.

      To ensure your logbook is valid, please refer to: https://www.ato.gov.au/Business/Income-and-deductions-for-business/Business-travel-expenses/Motor-vehicle-expenses/Calculating-your-deduction/Keeping-a-logbook/

      You are correct, in that the mileage allowance will be included in your taxable income. The motor vehicle expenses deduction will be used to offset this. The two methods available for claiming deductions can be found at the following link: https://www.ato.gov.au/Individuals/Tax-return/2016/Tax-return/Deduction-questions-D1-D10/D1-Work-related-car-expenses-2016/

      I hope this assists in answering your questions.

  2. Hi, may I know how do I claim for fuel costs under the logbook method if I did not keep all fuel receipts? How is it calculated? I do keep a valid logbook for at least 12 consecutive weeks. Thank you.

    1. Hi Emma
      The ATO requires that you keep all receipts in relation to your motor vehicle, except for fuel and oil; they require reasonable substantiation of your claim for fuel expenses. The estimated fuel cost is worked out based on the car’s fuel consumption, the average cost of fuel for the year and the number of kilometres travelled for the year. This number is based on your opening and closing odometer readings.
      Thanks for your question

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