To claim car expenses, you must use your car for work-related purposes.
This includes travel between work sites, visiting clients, attending work-related meetings, or carrying stock or equipment.
However, commuting to and from your regular workplace is generally not deductible.
How to Claim Car Expenses
There are two primary methods to claim car expenses:
- Logbook Method: This method requires you to keep a detailed logbook for 12 continuous weeks, recording the total kilometres travelled and business kilometres. Based on this logbook, you can claim a percentage of your car expenses.
- Cents Per Kilometre Method: This simpler method allows you to claim a fixed rate per kilometre for work-related travel. The rate varies each year.
Can I Claim the Entire Cost of My Car?
Unfortunately, you cannot claim the entire cost of your car as a tax deduction.
The ATO has specific rules regarding car expenses.
The logbook and cents per kilometre methods are designed to cover a portion of your car costs, including fuel, registration, insurance, maintenance, and depreciation.
What Car Expenses Can You Claim?
If you’re eligible to claim car expenses, you can potentially claim deductions for:
- Fuel
- Car registration
- Insurance
- Repairs and maintenance
- Interest on car loans
- Depreciation
- Lease payments
It’s essential to keep detailed records of all car-related expenses to support your claims.
How Many Kilometers Can You Claim?
The Australian Taxation Office (ATO) imposes a limit of 5,000 work-related kilometres per car per year.
This means you cannot claim for more than 5,000 kilometres of business use, regardless of the method you choose.
Do You Need a Logbook to Claim Car Expenses?
It is not mandatory, but keeping a logbook is generally the most accurate way to claim car expenses.
It provides detailed evidence of your business use and can result in a higher deduction.
If you opt for the cents per kilometre method, you won’t need a logbook.
Can You Claim Car Expenses If You’re Self-Employed?
Yes, if you’re self-employed and use your car for business purposes, you can generally claim car-related expenses as a tax deduction.
The same rules apply as for employees, including the logbook or cents per kilometre methods.
What If You Use Your Car for Both Work and Personal Use?
If you use your car for both work and personal purposes, you can only claim a deduction for the business portion of your expenses.
This is where a logbook becomes particularly valuable, as it accurately records your business use.
How to Keep Accurate Car Records?
To maximise your tax deductions and avoid potential ATO scrutiny, it’s good to maintain meticulous car records.
This includes:
- Odometer readings at the start and end of each logbook period (if using the logbook method)
- Copies of fuel receipts
- Logbook entries detailing business trips (date, destination, odometer readings)
- Repair and maintenance invoices
- Insurance premiums
Can You Claim Car Expenses If You Work From Home?
If you work from home and use your car to run errands related to your job, you may be able to claim car expenses.
However, you’ll need to demonstrate a direct connection between the car use and your work.
Claiming car expenses can be a great way to reduce your taxable income.
Knowing the rules and keeping accurate records, can better your chances of getting a successful claim.