Are you looking to claim deductions for your car expenses? You’re in the right place to claim these deductions. There are a few important things you need to know. Continue reading this blog to learn things you need to keep in mind when claiming car expense deductions.
Claiming a Deduction for Car Expenses
To claim car expense deductions:
- First, your vehicle must meet the definition of a car, which means it should have a load capacity of less than one tonne and carry fewer than nine passengers including the driver.
- Second, you must be the owner or leaser of the car. Unfortunately, if you use a vehicle under a salary sacrifice or nova lease arrangement, you can’t claim these deductions.
- Third, your expenses must be directly related to work.
- You can claim for trips between workplaces or for performing your work duties.
- However, commuting between your home and workplace generally doesn’t qualify unless in limited circumstances.
- Fourth, you must have personally spent the money on these expenses and weren’t reimbursed by your employer.
- Finally, make sure you have the necessary records to back up your claims.
Calculating Deductions for Car Expenses and Keeping Records
When calculating your deductions for car expenses, you can choose between the cents per kilometre method or the logbook method.
Cents Per Kiloletre Method
The cents per kilometre method allows you to claim a fixed rate per kilometre for work-related trips. To calculate your deductions using this approach, multiply the number of work-related kilometres you travel by car by the rates per kilometre for that specific income year. ‘Work-related kilometres’ are travelled by your car in the course of earning your assessable income.
- Use the rate for a specific income year for which you claim a deduction:
- 2023-24: use 85 cents per kilometre
- 2022-23: use 78 cents per kilometre
- 2020-21 and 2021-22: use 72 cents per kilometre
- You can claim a maximum of 5,000 work-related kilometres per car.
- You must maintain records showing how you work out your work-related kilometres.
5,000 work-related kilometres can be claimed if you and another joint owner use the car for separate income-generating purposes. The cents per kilometre rate includes all car expenses, including:
- decline in value
- fuel costs
When you work out your deduction using this approach, you can’t include any of these expenses on top of the rate.
The rate varies from year to year with the logbook method. You need to:
- keep a detailed logbook of your work-related trips and you can claim the portion of car expenses related to those trips.
- Must have receipts or other records of your car expenses
- use your logbook to make calculations of the deductible portion of your car expenses.
For 5 years, your logbook is valid. In case, your situation is changed and the logbook is not representative of your work-related use, you will have to complete a new 12-week logbook. If you use the logbook method for 2 or more than 2 cars, maintain a logbook for each car and ensure they cover the same time period. Remember to retain your records for at least five years after the end of the latest income year, whether you’re using the cents per kilometre method or the logbook method, keeping records and understanding the rules is crucial.
Maintaining Records of Expenses of a Car for Logbook Method
You are allowed to claim a decline in the value and running costs of your car. You need to keep:
- Receipts for oil and fuel expenses, or a record of your estimate of these expenditures depending on odometer readings for the start and end of the time period for which you are claiming.
- Receipts for other expenditures for your car – for instance, insurance, registration, services, tyres, lease payments, electricity expenses, repairs, and interest charges.
If you ever need guidance or assistance, don’t hesitate to contact Reliable Melbourne Accountants, your trusted partner in managing your car-related deductions. Get in touch today.
For more info check out this video