Motor Vehicle Deductions in Australia – What’s the deal?
The ATO have released their hit list for 2018 and beyond, most notably is the crackdown on work related motor vehicle and travel deductions. Over 8 billion dollars in motor vehicle deductions are claimed by around 3 million Aussies each year so it’s not surprising that the ATO would like to scrutinise these claims. Penalty fines and interest are be imposed on top of payment of additional tax for dodgy claims.
Here’s a quick guide to ensure you are claiming your full entitlement and how to substantiate it if the ATO come knocking on your door.
There are two methods to claim you motor vehicle deduction, the statutory method and the logbook method. Both limit your claim to work related motor vehicle use, which usually does not include commuting to and from work.
Types of deductible travel include:
Travel from work to a supplier or customer
Travel between office locations
Travel between jobs (if you have a second job)
Travel from home to a location that is not your usual place of work (at the request of your employer) and back home again
Attend conferences or meetings
To carry bulky tools to and from work or a job site (we’ll chat about this one, there are certain rules that apply)
Certain rules also apply if you don’t have a fixed place of employment
Statutory Method
The statutory method allows for claims of up to 5,000km work related travel during the year, claimed at a rate of 66c per kilometer. (68c for the 19FY).
Under this method you can claim a maximum deduction for $3,300. ($3,400 for the 19FY)
Requirements
No log book required
No need to track actual car expenses like petrol and repairs
Car make, model and registration are recorded in your tax return
Must be a car that you own
Must show how you derived the total km
If the ATO review your claim
You will need to justify your claim by explaining why you are required to use your car for work related purposes. The ATO may also require a written statement from your employer to help substantiate your claim.
Logbook Method
The logbook method is a stronger claim and is typically used by taxpayers that use their car often for work (eg. sales representatives or tradies). This method allows you to claim a percentage of all car expenses including petrol, insurance, repairs & maintenance, depreciation and even interest on loan repayments. To claim this method you will need a valid logbook that has tracked 12 consecutive weeks of all travel. That information will be used calculate the work related use of your car over the period.. You can use the same 12 week logbook for up to 5 years providing that your car use does not change. If your circumstances change, you will need to complete a new 12 week logbook.
Requirements
12 week logbook, completed in the last 5 years that is still relevant
Car make, model and registration
Must be a car that you own
Record the odometer at the end of each financial year
Receipts for all car related expenditure for the year (rego, insurance, repairs, fuel etc)
Purchase contract (so we can calculate depreciation)
Finance contract (to calculate interest paid)
If the ATO review your claim
You will be asked to provide all of the above to substantiate your claim. Your employer may also be asked to confirm your logbook.
Your motor vehicle can be a significant tax deduction if you get it right. The ATO are looking more closely at these claims so make sure you have a chat with us if you’re not sure what we should be including in your next tax return.
