You can claim motor vehicle travel that is directly connected with your work as a tax deduction.
To do so it is important to be able to distinguish between what is considered work related and what is private. Travel to and from your normal place of employment is generally considered private, however the ATO has provided examples of the exceptions where travel is considered to be work related:
• You are required to carry bulky tools or equipment (such as an extension ladder) for work and are unable to leave the tools on site in a secure location.
• You’re attending conferences or meetings.
• Delivering items or collecting supplies.
• Travel between two separate places of employment, provided one of the places is not your home (for example, when you have a second job).
• Travel from your home or normal workplace to an alternative workplace and back to your normal workplace or directly home.
• When your work requires you to perform itinerant work.
If you fall into any of the above categories, or one similar there are two possible methods to make a claim on motor vehicle expenses in your tax return. The first is known as the cents per kilometer method. As the name suggest the cents per kilometer method uses a pre-determined rate established by the ATO (multiply by the number of kilometers traveled throughout the year). There is currently a maximum limit of 5,000 kilometers per vehicle.
The alternative is to use the logbook method which establishes the work-related motor vehicle use by way of a percentage. The percentage is then applied to your motor vehicle expenses associated with that vehicle.
To work out your work-related percentage, you must record all business journeys made in your own motor vehicle over a 12-week consecutive period, detailing;
• When the log book period starts and finishes
• The start and finish odometer readings for the logbook period
• Date of each journey
• Start and finish time of each journey
• The number of kilometres travelled for each journey
• The purpose for the journey
• The total number of kilometres travelled during the 12-week period.
At the end of the 12-week period the work-related percentage can be determined. To do this, divide your business use kilometres by your total kilometres, then multiply by 100. For example: You’ve travelled a total of 5,000Km; 3,000km relate to work, the calculation is therefore 3,000 / 5,000 x 100 = 60%.
Now that you’ve determined your work-related percentage, it’s important to know what expenses you are entitled to include as part of your claim. These expenses include:
• The running cost such as fuel and oil
• Repairs and maintenance
• Interest on motor vehicle loan
• Lease payments
Your total motor vehicle expenses are added up and then apportioned based on your logbook percentage. Continuing on with the above example, your logbook percentage is 60% and your total motor vehicle expenses are $10,000 so your deduction will be 10,000 x 0.60 = $6,000.
Reminder: You will need to keep receipts for all expenses to be able to claim them.
Pro tip #1
A logbook has a potential effective life of five years. A new logbook is required if your motor vehicle or job role changes.
Pro tip #2
If you started to use your car for business purposes less than 12 weeks before the end of the income year, you can continue to keep a logbook into the next year so it covers the required 12 weeks.
Pro tip #3
If you want to use the logbook method for two or more cars, the logbook for each car must cover the same period. The 12-week period you choose should be representative of the business use of all cars.
Author: Georgia Burgess