VEHICLE TAX DEDUCTIONS

July 19, 2019

As we approach the 2016 tax season, we wanted to let you know about an important change to work related car expenses that may affect your return this year.

We look at the claimable vehicle tax deductions available for 2016 and what has changed from previous years.

 

What’s changing?

Previously, there were four methods to calculate and claim your work related car expense deductions:

  • 12 percent of the original value
  • One third of actual expenses
  • A logbook for 12 plus continuous weeks
  • Cents per kilometre

That has now all changed for 2016. The ATO eliminated the 12 percent of original value method AND the 1/3 of actual expenses method from the tax return.

Now there are only two methods to calculate car expense claims on your tax return.

  1. The logbook method, or
  2. The cents per kilometre method

 

Some details about the car expense calculations allowed in 2016:

Cents per Kilometre

This method is popular if you’ll drive less than 5000 work related kilometres.

Just estimate your total kilometres (up to 5,000 km limit) and multiply by 66c to get your total deduction amount.

You don’t need to keep a record (although, the ATO may ask you to prove how you calculated your amount so keep it accurate.)

*Note: In past years, the rate for claiming cents per km was determined by the size of your car’s engine. For 2016 the ATO has just one fixed rate of 66 cents per km for all cars regardless of engine size. This will reduce the amount that some people can claim as a deduction (so, using a logbook may work better for you).

 

The Logbook Method

The most popular way of claiming your car expenses is via the Logbook Method.

Keep in mind you must keep a logbook record of all km’s (work and personal) driven for at least 12 weeks. These must be 12 consecutive weeks (ie 12 weeks in a row).

There are very strict ATO rules for completing a car logbook, so make sure you abide by them all.

Your logbook must include every trip you take – not just your business related trips.

The logbook must include the following details:

  • date for each journey
  • start and finish times for each journey
  • start and finish odometer readings for each journey
  • total number of kilometres for each journey
  • reason for each journey
  • start and finish dates for the logbook period
  • start and finish odometer reading for the logbook period
  • total number of kilometres travelled during the period
  • business use percentage for the period

 Wildon Log book

 

 

How to calculate your business use percentage

Once you’ve completed your 12 week logbook, you’ll be able to calculate your car’s business use percentage.

To do this, divide your business use kilometres by your total kilometres, then multiply by 100.

For example, if you travel 5,000 kilometres in total for the 12 week period, and 1,200 of these were for business-specific purposes, you would do the following calculation:

1,200 / 5,000 x 100 = 24

In this example, your car’s business use percentage would be 24%. This means that you could claim 24% of your vehicle expenses for the financial year.

 

What sort of vehicle expenses can you claim?

Vehicle expenses include:

  • running costs such as fuel, oil, and servicing
  • registration
  • insurance
  • vehicle depreciation

Vehicle expenses do not include:

  • the purchase cost of the car
  • parking tickets, speeding and other fines

 

Remember: Record, Record, Record

Of course, it’s not just your logbook records that you need to keep in order to make a claim for car expenses in your tax return. You must also keep written evidence (such as receipts) of all the car expenses you claim.

Remember: Your car expenses claims cannot be guessed or made-up. They must be legitimate, and you must have evidence of them. If you don’t you could be audited by the ATO, and this could cost you thousands of dollars in fines.

By sticking to the rules and implementing the logbook method for claiming your vehicle tax deductions, you can maximise your tax refund without having to worry about the ATO becoming an unwanted back seat driver.

 

For more information on vehicle and travel expenses you can visit the Australian Taxation Office website: www.ato.gov.au

Article source

 

Are you in the market for a new vehicle? Not sure where to start your search? Westside Auto Wholesale have over 1,500 vehicles conveniently located under one roof. Call past today for a browse around our massive warehouse or view our full range of available stock online at www.westsideauto.com.au

Previous
Back to Blog
Next