Claiming work-related motor vehicle expenses tax deduction

If you use your own car for work-related travel (even if you are leasing or hiring it), you may be entitled to a work-related motor vehicle expenses tax deduction. Even if you use your car part time for work reasons, and part time for personal reasons, you can claim the work related portion of your car expenses. However, you have to keep track of that use.

There are two methods currently available to claim motor vehicle expenses tax deductions – cents per kilometres and the logbook method.

Logbook Method (extracted from ATO’s website)

• Your claim is based on the business use percentage of the expenses for the car.
• Expenses include running costs and decline in value but not capital costs, such as the purchase price of your car, the principal on any money borrowed to buy it and any improvement costs.
• To work out your business use percentage, you need a logbook and the odometer readings for the logbook period (see below).
• You can claim fuel and oil costs based on either your actual receipts or you can estimate the expenses based on odometer records that show readings from the start and the end of the period you had the car during the year.
• You need written evidence for all other expenses for the car.

Your business use percentage is the percentage of kilometres you travelled in the car for work during the year divided by the total kilometres travelled by the car during the year.

If the pattern of your car use changed during the year, make a reasonable estimate of your business use percentage for the whole of financial year, taking into account your logbook, odometer and other records, any variations in the pattern of use of your car and any changes in the number of cars you used in the course of earning your income.

Logbook Period

Your logbook is valid for five years. If this is the first year you are using this method, you must have kept a logbook during the financial year. It must cover at least 12 continuous weeks. If you started using your car for work-related purposes less than 12 weeks before the end of the year, you can extend the 12-week period into the next financial year. (But, if you are using the logbook method for two or more cars, the logbook for each car must cover the same period.)

If you established your business use percentage using a logbook from an earlier year, you need to keep that logbook and maintain odometer records. You also need to keep a logbook if the ATO tells you in writing to keep one.

Your logbook must show:

• When the logbook period starts and ends, and the odometer readings at these times.
• The total number of kilometres the car travelled during the logbook period.
• The number of kilometres travelled for work during the logbook period based on the journeys recorded for the period.
• The business use percentage for the period.

Entries in the logbook for each business trip must be made at the end of the journey (or as soon as possible afterwards) and show the:

• Date the journey began and ended.
• Odometer readings at the start and end of the journey.
• Kilometres travelled on the journey.
• Reason for the journey.

Your records must also show the make, model, engine capacity and registration number of the car.

Click on the button below to download your log book worksheet:

Takeaway

It’s well worth taking the time to track your work-related car use and claim the motor vehicle expenses tax deduction. To get an idea of what you might save, check out the ATO’s online calculator, or get in touch. We’d be happy to talk you through the process and your potential savings.