Claiming car expenses on your Australian tax return can potentially save you money.
However, understanding the rules and regulations will help you to avoid any complications with the Australian Taxation Office (ATO).
This article will guide you through the process of claiming car expenses by providing you with clear explanations and practical advice.
Can I Claim Car Expenses on My Tax Return?
Yes, you can potentially claim car expenses on your Australian tax return if you use your car for work-related purposes.
This includes travel to client meetings, job sites, or other work-related locations.
However, you cannot claim expenses for commuting between your home and workplace.
How Do I Calculate My Car Expenses?
There are two primary methods to calculate your car expenses:
- Logbook method: This involves keeping a detailed logbook for 12 continuous weeks to determine your business-use percentage. You can then claim a deduction for a portion of your car expenses based on this percentage.
- Cent-per-kilometre method: This simpler method allows you to claim a set rate per kilometre for work-related travel. However, there’s a limit of 5,000 kilometres per car per year.
What Car Expenses Can I Claim?
If you use the logbook method, you can potentially claim deductions for:
- Car registration
- Insurance
- Fuel
- Repairs and maintenance
- Depreciation
If you use the cent-per-kilometre method, you can only claim a deduction for the work-related kilometres travelled.
Do I Need to Keep Records?
Regardless of the method you choose, maintaining accurate records is very important.
If you use the logbook method, you must keep a detailed logbook for 12 continuous weeks, including the date, odometer readings, purpose of each trip, and business kilometres travelled.
For both methods, you should keep receipts for car-related expenses to support your claims.
What Records Do You Need to Keep?
Maintaining accurate records is essential for successfully claiming car expenses.
The ATO requires you to keep detailed records, including:
- A logbook (if using the logbook method)
- Odometer readings at the start and end of each tax year
- Fuel receipts
- Repair and maintenance invoices
- Registration and insurance documents
What is the Cent-per-Kilometre Rate?
The cent-per-kilometre rate is updated annually. For the 2023-24 tax year, the rate is 85 cents per kilometre.
This rate covers fuel, car depreciation, insurance, registration, and maintenance.
Can I Claim Car Expenses for a Car Owned by My Business?
If you own a car in the name of your business, you may be eligible to claim deductions for car expenses.
However, the rules and regulations differ from those for personally owned cars.
You should consult with a tax professional for specific advice.
You can also claim car expenses if you use your car for both work and personal use.
However, you can only claim a deduction for the portion of your expenses related to work-related travel.
What if I Use Public Transport or Ride-Sharing?
If you use public transport or ride-sharing for work-related travel, you can generally claim a deduction for these expenses.
You will need to keep receipts or other evidence to support your claim.
What Are the Penalties for Claiming Incorrect Car Expenses?
Claiming incorrect car expenses can lead to penalties and interest charges from the ATO.
You have to ensure that your claims are accurate and supported by proper documentation.