Are you claiming motor vehicle expenses this tax season? Make sure your claiming right.
If the Australian Taxation Office (ATO) knocks on your door are you confident you have claimed these expenses correctly?
Firstly, did you use your vehicle for work? Generally, the trip from home to work is personal in nature. Except for those listed below:
If you use your own car in the course of performing your job as an employee, for example, to:
- carry bulky tools or equipment (such as an extension ladder or cello) which your employer requires you to use for work and cannot leave at work
- attend conferences or meetings
- deliver items or collect supplies
- travel between two separate places of employment, provided one of the places is not your home (for example, when you have a second job)
- travel from your normal workplace to an alternative workplace that is not a regular workplace back to your normal workplace or directly home
- from your normal workplace or your home to an alternative workplace that is not a regular workplace (for example, a client’s premises) while you are on duty
- perform itinerant work.
If you receive an allowance from your employer for car expenses, it is assessable income and the allowance must be included on your tax return. The amount of the allowance will usually be shown on your payment summary.
If you are claiming a deduction for using your own car in performing your employment duties (including a car you lease or hire), it is treated as a car expense. These expenses are listed in D1 in the tax return. This can be claimed under either the Log Book method or cents per kilometre method (see below).
If you use someone else’s car for work purposes, you may be able to claim the direct costs (such as fuel) as a travel expense. These expenses are to be listed in D2 in the tax return and can only be claimed for exact amounts spent.
If the travel was partly private, you can claim only the work-related portion.
Cents per kilometre method
The cents per kilometre method allows individuals use 66 cents per kilometre for all motor vehicles to calculate a claim for the 2017–18 income year. From 1 July 2018 the rate is 68 cents per kilometre.
- You can claim a maximum of 5,000 business kilometres per car.
- You don’t need written evidence but you need to be able to show how you worked out your business kilometres (for example, by producing diary records of work-related trips).
Where you and another joint owner use the car for separate income-producing purposes, you can each claim up to a maximum of 5,000 kilometres.
- Your claim is based on the business-use percentage of the expenses for the car.
- Expenses include running costs and decline in value but not capital costs, such as the purchase price of your car, the principal on any money borrowed to buy it and any improvement costs.
- To work out your business-use percentage, you need a logbook and the odometer readings for the logbook period. The logbook period is a minimum continuous period of 12 weeks.
- You can claim fuel and oil costs based on either your actual receipts or you can estimate the expenses based on odometer records that show readings from the start and the end of the period you had the car during the year.
- You need written evidence for all other expenses for the car.
Accidents and costs to third parties
The ATO website states “Where you use your own motor vehicle in the course of your employment, you may be entitled to a deduction for the costs you incurred if you are:
- involved in an accident which causes damage to a third-party vehicle, and
- liable for the damages/compensation for the damage caused to the other vehicle, you may be entitled to a deduction for the costs you incurred.
Where an accident occurs in the course of producing your assessable income, the expenses associated with the liability to pay for the damage to the other vehicle involved in the accident are incidental and relevant to the production of your assessable income. They are not capital, private or domestic.”