The use of a car that you owned, leased, or hired in the year can be claimed if you used it for any work related purposes.
Even if the car is not registered in your name, private arrangements can be taken into account. If the car was used as your own and you paid for all related expenses, then your car use can be eligible for deduction. However, if your car is provided by your employer, or is included as a part of your salary package, then any expenses cannot be claimed.
What can and can’t be claimed
If your car was used in the course of performing your job as an employee, then this use can be claimed for deduction. Common work related car expenses include:
- Travel to conferences or meetings
- Transporting equipment
- Carrying bulky tools or items that you use for work
- Travel to alternative worksites
- Delivering or picking up items related to your job or as required by your employer
There are, however, some costs that you cannot claim. This includes any private or minor uses, such as travel between work and home. Additionally, you cannot claim costs that are met by your employer, usually through allowances, or for any costs that were reimbursed.
How deductions are calculated.
To calculate your deduction, you need to know or have an estimate of your total business kilometres. These are the kilometres travelled through the year in the course of your employment.
From the 1st July 2015, there are two available methods in calculating car expenses. Which method is used is up for you to decide, you may choose the one that gives the largest deduction or is the most convenient.
Method one: Logbook
Under this method, you can claim the business-use percentage of each expense. This calculation is based on a logbook that must be kept and filled out. As well as the log book, you must have written evidence of all other expenses.
The logbook must be used for 12 or more consecutive weeks in the first year, and can either be pre-printed or you can make your own. Your log book must record all trips made in the car for work purposes over the financial year. The log book must record when the log book period began and ended, the odometer readings at the start and end of that period and the total kilometres travelled.
For each trip, it must be recorded in the log book:
- Start and finishing times
- Odometer readings at the start and end
- Kilometres travelled
- Reason for travel
If more than one trip is made on the same day, they can be recorded as a single use in the logbook. Additionally, fuel and oil costs can be based on your actual receipts or it can be estimated based on the records in the logbook.
In order for us to calculate this estimate, you will need to provide the total amount of expenses spent on your car throughout the year.
Total Expenses for the year will include:
- Repairs and maintenance
- Fuel & oil
- Depreciation (we can work this out if you tell us when the car was bought and for how much)
For example, Melissa’s logbook shows that she travelled a total of 15,000kms during the year, of which 10,500 were for her work. Based on these figures, Melissa can calculate the percentage her car was used for business purposes:
10500/15000 x 100 = 70%
Melissa’s total expense for the year was $10,000. Using the logbook method, Melissa can claim:
70% x $10,000 = $7,000
“The logbook must be used for 12 or more consecutive weeks in the first year, and can either be pre-printed or you can make your own”
If you need to know more about your logbook then check out the ATO’s article on Keeping a Logbook
Method two: Cents per kilometre.
Under this method, your claim is based on a set rate for each kilometre travelled. You can claim up to a maximum of 5,000 kilometres and you do not need to provide written evidence, however, you may be asked to show how the figure was calculated. The claim is worked out by multiplying the total business kilometres by the standard rate of 66 cents per kilometre.
For example, Sam travelled 3,500 kilometres during the financial year. Using the cents per kilometre method Sam worked out she could claim (0.66 X 3500) $2310 for her car expenses.
For more information on Car Expenses and how to claim deductions, visit ato.gov.au
Jarrod Dengate – Accountant
Jarrod started working with Fitzpatrick Group in August 2016. He is currently studying a Bachelor of Commerce at the University of Wollongong, specialising in Accounting and Economics.