About motor vehicle expenses
When claiming a deduction for motor vehicle expenses, you are required to consider:
- The method you use to calculate your claim for motor vehicle expenses primarily depends on the structure of your business.
- If you change the structure of your business, your obligations and entitlements may change.
- If you use your motor vehicle for both personal and business use, you can only claim the part of your expenses that is used for business.
- You are required to keep records of your expenses for 5 years – (consider maintaining a logbook if you want more options when claiming a deduction for your motor vehicle).
Types of motor vehicles
The type of motor vehicle you drive can impact how you calculate your claim. A motor vehicle is either a car or an ‘other vehicle’.
Your motor vehicle is a car
A car is considered a motor vehicle that can carry:
- A load of less than one tonne, and
- Fewer than 9 passengers.
Many four-wheel drives and some utes are classified as cars.
Your motor vehicle is ‘other vehicle’
Your motor vehicle is an ‘other vehicle’ if it is not a car. Other vehicles include:
- Motorcycles
- Minivans that can carry 9 or more passengers
- Panel vans or utes that can carry loads of one tonne or more.
Similar to other vehicles, expenses incurred in running a ute are not automatically tax deductible; you are required to use the ute in your business, and allowed to claim the business portion.
Types of motor vehicle expenses
Common types of motor vehicle expenses you can claim include:
- Oil and fuel
- Electricity (for charging an electric vehicle)
- Servicing and repairs
- Interest on a motor vehicle loan
- Lease payments
- Insurance
- Registration
- Depreciation (decline in value) of the vehicle.
Obligations and entitlements for your business structure
The structure of your business affects your obligations and entitlements when claiming deductions for motor vehicle expenses. For more information on your obligations and entitlements, you can speak to your taxation accountants.
Sole traders and partnerships
If you run your business as a sole trader or partnership, the way to calculate your deduction depends on the type of vehicle and how it is used. The vehicle can be leased, owned, or hired under a hire purchase agreement. You can only claim motor vehicle expenses that are part of the everyday running of your business. If the vehicle is used for personal and business use, you need to exclude any personal use.
Claiming deductions for cars
You can claim car expenses using 2 methods:
1. Cents per kilometre method
- You can claim up to 5,000 business km per year.
- The rate is 88 cents per km for 2024-25.
- It covers all car expenses, including depreciation.
- No logbook required, but you need to show how you calculated business km.
If you claim more than 5,000 km, you must use the logbook method.
2. Logbook method
- You can claim the business-use percentage of your car expenses.
- You can keep a logbook for at least 12 continuous weeks.
- Record trip dates, details, km travelled, odometer readings, and trip purpose.
- The logbook can be used for up to 5 years if your travel pattern stays similar.
- You can also claim depreciation, but not the full purchase price of the car.
Claiming deductions for other vehicles
For all other vehicles, you can’t use the logbook method or cents-per-kilometre. Your claims should be for actual costs for expenses you incurred, depending on receipts. You can use a journal or diary to separate private use from business use.
Records you need to keep
The records you need to keep depend on the method you use to calculate your motor vehicle expenses. Irrespective of the method you use, you’ll need to keep:
- Lease or loan documents
- Details on how you calculated your claim
- Tax invoices
- Registration papers.
Other records include:
- Details of the kilometres travelled for business and personal purposes.
- Receipts for oil, fuel, repairs, servicing and insurance cover.
Conclusion
This guide shows ways to claim motor vehicle expenses for your business structure. If you are not familiar with this process, you can reach out to Reliable Melbourne Accountants.