If you use your car for work-related purposes, you may be eligible to claim fuel expenses as a tax deduction.
However, the Australian Tax Office (ATO) has specific guidelines on what qualifies.
This article will help you understand these rules and maximise your tax return.
What Vehicle Expenses Can I Claim?
Generally, you can claim deductions for expenses incurred while using your car for work-related purposes.
These expenses include:
- Fuel and oil: This is where our focus lies.
- Repairs and servicing: Costs associated with maintaining your vehicle.
- Car registration: Annual fees for operating your car.
- Car insurance: Premiums paid for your car insurance.
- Interest on car loans: Interest payments on loans used to purchase your car.
- Depreciation: The decline in value of your car over time.
Can I Claim Fuel for Work-Related Travel?
The golden rule for claiming fuel as a tax deduction is that the expense must be directly related to earning your income.
This means that your travel must be necessary for your work.
Common work-related travel includes:
- Travel between different work locations
- Travel to client sites or job locations
- Carrying bulky tools or equipment for work
What you generally can’t claim includes:
- Travel between your home and regular workplace
- Private use of your car
How to Claim Fuel Expenses
There are two primary methods to claim fuel expenses:
- Logbook Method: This method involves keeping a detailed record of your business and private kilometres for a continuous 12-week period. You then calculate the percentage of business use and claim a portion of your total car expenses, including fuel.
- Cent-per-kilometre Method: This simpler method allows you to claim a fixed rate per kilometre for business travel. However, it has limitations on the total amount you can claim.
Do I Need Receipts for Fuel?
While receipts can be helpful evidence, they are not strictly required for claiming fuel expenses.
However, it’s always a good idea to retain records of your expenses, such as credit card statements or bank transactions, to support your claims.
Can I Claim Fuel Tax Credits?
If you run a business, you might be eligible for fuel tax credits. These credits offset the fuel excise duty you pay.
To claim fuel tax credits, your business must be registered for GST and you need to keep records of your fuel purchases.
What if I Use My Car for Both Work and Private Use?
If you use your car for both work and personal purposes, you’ll need to determine the business use percentage.
This is where the logbook method becomes crucial.
By accurately recording your business kilometres, you can calculate the portion of your fuel expenses that is deductible.
What Records Do I Need to Keep?
To successfully claim fuel expenses, maintaining accurate records is essential.
The Australian Taxation Office (ATO) recommends keeping the following information:
- Odometer readings at the start and end of each tax year
- Fuel purchase receipts or records of expenses
- Logbook records if using the logbook method
- Service and repair receipts
How Long Should I Keep My Records?
The ATO generally requires you to keep records for five years from the date of lodging your tax return.
However, it’s advisable to retain records for a longer period, especially for significant expenses.
Can I Claim Fuel for Home Office Expenses?
If you have a home office, you might be able to claim a portion of your car expenses, including fuel, if you use your car to travel to get office supplies or meet clients related to your home business.
However, the rules around home office deductions can be complex, so check the ATO guidelines carefully.
What Happens if I Get Audited?
If the ATO audits your tax return, they may request additional information to support your fuel expense claims.
Having accurate and detailed records is crucial in this situation.