Work Related Car Expenses: What To Claim?
Car expenses are the most common work related expenses and is one of the largest expenses. Car expenses are costs incurred as a result of using your car (whether owned, leased or hired under a hire-purchase agreement) for work-related travel.
They do not include expenses for vehicles other than cars, for example, motorcycles, utility trucks or panel vans with a carrying capacity of one tonne or more, or any other vehicle with a carrying capacity of nine or more passengers.
Examples of car expenses include fuel, repairs, maintenance, registration, lease costs, depreciation, interest on borrowings, car wash and parking.
The eligible car expenses do not include capital costs such as the initial purchase of the car or improvements to it such as replacing an engine.
If you are required to use your car for work then the main two forms of methods are:
Cents per kilometre method
Using the Australian Taxation Office’s Rates Per Business Kilometre table, calculate the cents per kilometre for your car’s engine capacity, and then multiply this by the number of kilometres travelled.
You can claim up to a maximum of 5000km each year with diary evidence to show how you worked out the number of kilometres travelled.
This method is best if you only do a few trips during the year and don’t have a new vehicle of high business percentage use. The maximum you can claim is $3750.
This is best for people who have a high business usage of their motor vehicle. You are required to keep a logbook for 12 weeks, which serves as sufficient record of vehicle usage for the next five years with the same vehicle.
The logbook will allow you calculate a business percentage usage of the car, which should be somewhere around 80 to 95 per cent of total usage. This allows you to claim all running and maintenance, finance costs and deprecation or lease expense on that motor vehicle. You must keep all receipts to prove your claim and be able to substantiate your logbook travel.
This method leads to the largest tax deduction as long as you have a high business percentage use of the vehicle.
Work-related travel expenses include travel between two places of work or employment, or travel to shifting places of employment.
It may also be available where you have to carry bulky tools or equipment with you to work. It does not, however, include direct travel between a person’s home and a place of work.
In the event you use your car for work, keep a log book AND keep all your expenses for the year. It will allow you the option of selecting the best method of claiming the cost of running your vehicle – rather than just the easiest method.
Reimbursement for car expenses
If you received an allowance for car expenses or a reimbursement that was worked out by reference to the distance the car travelled, you must show the amount of the reimbursement or allowance as income on your tax return.