Moving forward from 1 July 2015 the ATO have revised the way you are able to claim your car expenses too the following two methods –
- Cents per business km travelled
- Logbook method
You can claim a deduction for work-related car expenses if you use your own car in the course of performing your job as an employee. Here are a few examples –
- carry bulky tools or equipment
- attend conferences or meetings
- deliver items or collect supplies
- travel between two separate places of employment (for example, when you have a second job)
- travel from your normal workplace to an alternative workplace and back to your normal workplace or directly home
- travel from your home to an alternative workplace and then to your normal workplace or directly home (for example, if you travel to a client’s premises)
- perform itinerant work.
Method 1 – Cents per km travelled
In the past the rate per km travelled was based on the size of your car engine. Now the ATO have introduced a flat rate of 66 cents per business kilometer regardless of the size of your car engine. This rate is valid for both the 2016 and 2017 tax years.
This being the basic of the two methods and involves the following
- You can claim a set rate for per business km’s travelled
- The maximum claim is 5000 business km per year
- You don’t require to have written evidence to show how many km’s travelled, but the ATO may ask to show how you calculated your claim. We suggest keeping a diary of business/work related km travelled.
Cents per km example –
Steve is a business development manager for XYZ Pty Ltd and is required to attend client meetings on site. Steve is required to use his own car to attend these meetings and travels from work to the client’s premises and return throughout the year.
According to Steve’s diary notes, he has travelled a total of 3890 km business/work related km’s for the 2016 FY
Calculation would be
3890 km’s travelled x 66 cents = $2567 allowable claim.
Method 2 – Logbook
This method allows claiming of all your car expenses according to your business use percentage as recorded in your logbook. The type of expenses includes running costs and depreciation.
- To calculate your business use percentage, you will first need to complete a logbook for a continuous 12 week period. You can purchase a preprinted logbook from most stationery suppliers or make your own. If you are creating your own logbook or need assistance with a preprinted logbook, we can assist you as to what information needs to be included.
- All costs require written evidence. Though you can estimate fuel and oil costs based on odometer readings from the start and the end period you had the car during the year.
The amount you are entitle to claim is your business use percentage is the percentage of km’s you travelled in the car for work during the year divided by the total km’s travelled by the car during the year.
Your logbook is valid for 5 years if your pattern of business use remains constant during this time. If the pattern changes for any reason, an example would be, “change of role”, you will need to complete a new logbook and that will remain valid for a further 5 years.
`Logbook example –
Steve is sales rep for ABC Pty Ltd and uses his car to visit his clients on a regular basis on site. Most of Steve’s time is spent on the road and going from client to client. We assume that Steve has completed his logbook for a 12 week period and has calculated his business use to be 68.2%. Steve can claim 68.2% of the following expense.
- Fuel $3400
- Servicing $900
- Insurance $1200
- Registration $790
- Depreciation $8000
Expenses totaling $14290.00 for the 2016 financial year.
Steve’s then applies his business use rate of 68.2% to the total annual expenses –
- $14290.00 x 68.2% = $9745 deduction against salary income
Types of worked related trips –
- you used your car because you had to carry bulky tools or equipment that you used for work and could not leave at your workplace (for example, an extension ladder or cello)
- your home was a base of employment (that is, you started your work at home and travelled to a workplace to continue your work for the same employer)
- you had shifting places of employment (that is, you regularly worked at more than one site each day before returning home).
- between two separate places of employment (for example, when you have a second job)
- from your normal workplace to an alternative workplace while you are still on duty and back to your normal workplace or directly home
- from your home to an alternative workplace and then to your normal workplace or directly home (for example, if you travel to a client’s premises to work there for the day).
If the travel was partly private, you can claim only the work-related part.
You cannot claim normal trips between your home and your workplace, even if:
- you did minor work-related tasks at home or between home and your workplace
- you travelled between your home and workplace more than once a day
- you were on call
- there was no public transport near work
- you worked outside normal business hours
- your home was a place where you ran your own business and you travelled directly to a place of employment where you worked for somebody else.
It’s critical that you have a compliant logbook to be able to claim a percentage of your annual car expenses and depreciation including finance costs. The ATO are actively reviewing tax payers logbooks making sure that have been competed correctly and are valid for the year you are making your claim.
For further information and assistance, please phone our office (03) 9682 7011 or
Email – info@elevated accounting.com.au