Claiming your car expenses.

How to claim your work-related car expenses.

In this blog article we take a closer look at claiming your car expenses. Importantly, this guide only applies to individuals claiming work-related travel as special rules apply for company vehicles.

This information relates to car expenses only. A car is defined as a motor vehicle (excluding motor cycles or vehicles designed to carry a load of more than one tonne).

Most motor vehicles would be defined as a car, but it is still important to distinguish as different rules apply depending on the type of vehicle.

When you can claim

If you own a car and use it in your work-related duties (including a car you lease or have under finance), you may be able to claim a deduction for car expenses.

Even if you use someone else’s car for work purposes, you may be able to claim the running cost but not decline in value.

Generally, you can’t claim the cost of travel between home and work because this travel is private.

Examples of when you can claim travel:

  • carry bulky tools or equipment that your employer requires you to use for work and you can’t leave at work
  • attend conferences or meetings
  • deliver items or collect supplies
  • travel between two separate places of employment, but not if one of the places is your home (for example, when you have a second job)
  • travel from your normal workplace to an alternative workplace that is not a regular workplace back to your normal workplace or directly home
  • travel from your normal workplace or your home to an alternative workplace that is not a regular workplace – for example, a client’s premises
  • perform itinerant work.

How to calculate your claim

There are two methods of claiming work-related car expenses:

  • Cents per kilometre method
  • Logbook method

Cents per kilometre method

Under this method a flat rate of 68 cents applies to work-related travel and is capped at 5,000 kilometres per car.

For example, John uses his car during the course of his duties and records work-related trips totalling 300 kilometres. He would be entitled to a tax deduction of:

300Km x $0.68 = $204 tax deduction

You don’t need written evidence but you need to be able to show how you worked out your business kilometres (for example, by producing diary records of work-related trips).

This method is the simplest and easiest to comply with, but not suitable for someone with a high work-related car use.

Logbook method

Under the logbook method you claim your actual car expenses based on the work-related percentage of use. You must have evidence for all expenses for the car.

Expense you can claim include the running costs (fuel, registration, insurance, maintenance) and ownership costs (decline in value, interest on borrowings and improvements).

To work out your deductible percentage, you need a logbook and the odometer readings for the logbook period. The logbook period is a minimum continuous period of 12 weeks.

For example, John uses his car for work-related travel and keeps a logbook that shows the car is used 70% for work and 30% for private.

He is therefore entitled to claim 70% of all costs. Let’s assume he incurred the following expenses:

Fuel $3,000

Registration & insurance $1,500

Decline in value $8,500

Total expenses $13,000

Claim $13,000 x 70% = $9,100 tax deduction

You can see that this method generally gives the highest deduction but requires much greater compliance and supporting evidence.

It is also one of the ATO’s key focuses in auditing individual tax returns, due to the likelihood of making error or failing to keep proper written evidence. Particular focus should be given to the preparation and maintenance of your logbook.

As always, if you have any concerns or need further advice please contact our office.

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