Running a business with more than one vehicle on the road? Save money with the right advice.
2018 Update: This blog has been reviewed and updated to contain information relevant to claiming car expenses in 2018.
If you find yourself traveling a considerable distance by car to get to work, or even as part of your work you may want to consider tracking your travel in order to claim some money back on tax. There are a couple of ways to do this.
Claiming car expenses in 2018
How does it Work?
The “Cents per kilometre method” is the simplest way to claiming car expenses in 2018. If you decide to go ahead with this method, you will have to keep in mind that the following points will apply:
- Your claim is based on a set rate for each business kilometre travelled;
- You can claim a maximum of 5,000 business kilometres per vehicle;
- You do not need written evidence to show how many kilometres you have travelled, but the Tax Office may ask you to show how you worked out your business kilometres; and
- You cannot make a separate claim for depreciation of the value of the car.
Cents Per Kilometre
How much can I claim?
You may be wondering exactly how much you can claim. If you are consistently travelling a set distance for work every day, all you have to do is take note of the kilometres you are travelling during that day and multiply that number by the number of days you work during the financial year you are looking to claim.
How many cents to a kilometre?
The going rate for cents to a kilometre in the 2017/18 financial year is 66c/km. This has been true for the 2015/16 and 2016/17 periods as well; however, this number is reviewed each year and may change after each review at the discretion of the ATO. So how much money should you expect to get back using this method? Use our solution below!
(66 cents x Your Daily Kilometres) x The number of days you’ve worked during that financial year
If you were travelling 15 kilometres a day, you would have $69.3 accrued just for that week (7 Days) of driving. This calculation can be used quite easily if your travel distance (km) is consistently the same every day.
If you are travelling different distances every day, it would be wise to keep note of the distances you travel in order to properly estimate exactly how much you are going to be able to claim back. Keep in mind that you can only achieve a maximum of 5000 kilometres on the cents per kilometre method.
Please note that you cannot make a separate claim on your car concerning depreciating of the car’s value.
The Logbook Method
Claiming car expenses in 2018 for more than 5000 Kilometres
In order to acquire a greater deduction for your cars travel expenses, it is beneficial to keep a travel log book. In order to correctly track your kilometres you will need to keep:
- a logbook to calculate the business use percentage
- odometer readings for the start and end of the period you owned or leased the car, and
- written evidence for all car expenses, except for fuel and oil costs.
Your logbook is only valid for five years. You must have kept a logbook during the first year this method is used. The logbook must cover at least 12 continuous weeks.
If you started using your car for business purposes less than 12 weeks before the end of the income year, you can continue keeping a logbook into the following income year so that your logbook covers the required 12 weeks. If you want to use the logbook method for two or more cars, the logbook for each car must cover the same period.
Your logbook must 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
- the total number of kilometres that the car travelled during the logbook period
- the number of kilometres travelled for work during the log book period based on journeys recorded in the logbook. If you make two or more in a row on the same day, they can be recorded as a single journey, and
- the business use percentage for the logbook period.
You can get a logbook to track your distance from any stationery shop, or you can draw up your own. Alternatively, you can get a logbook app on your phone to keep track of all your travels.
© Fitzpatrick Group 2018
Peter Carter – Senior Accountant
Peter is a Certified Practicing Accountant (CPA) and the fantastic authour of Claiming Car Expenses in 2018. He has also completed an Advanced Diploma in Accounting and a Bachelor of Commerce (Accounting and Finance Law).