Vehicle expenses are a very regulated area for claiming deductions, so good guidance on making car expense claims is essential to stay on the right side of the taxman. It is not generally allowed, for example, to claim the cost of trips between home and work, even if you do minor work-related tasks on the way.
This is also the case where you may be called into work while otherwise at home, or if you worked shifts that are outside usual work hours. The fact that there happens to be no public transport near where you work also generally doesn't make a difference.
The rules do allow a claim however if you need to drive in order to carry bulky items (like an extension ladder, for example) that can't be left at the workplace, or you have multiple sites that you travel between as part of your employment.
Claims can also be made if your home is a "base" of work. You can also make a claim if you have a second job and travel directly from one workplace to another.
Car expenses are costs resulting from using your car for work, but these deductions are only for "cars" and are not for other vehicles such as motorcycles, utes or vans.
Expenses for these vehicles are treated as "travel" expenses, as are costs for short-term car hire, bridge and road tolls, parking fees and such.
To claim legitimate car expenses, the first step is to work out (and record) how many of the kilometres travelled are business kilometres. After that, there are four methods to choose from, and you can take up whichever of these methods give you the largest deduction - provided you have the back-up evidence if the Tax Office asks for it.
The four options to determine car expense deductions are:
- cents per kilometre
- 12% of original value
- one-third of actual expenses, and
- the logbook method.
If you are registered for GST you will need all the car-related invoices to claim back the right amount of input tax credits. You will again need to know the business kilometres to work out the percentage. Only expenses made for a "creditable purpose" are eligible for input tax credit claims.
One interesting, and perhaps unintended, benefit for employers is that where a car is supplied to an employee, and that employee uses the vehicle for part-private uses, the employer can still claim input tax credit entitlements at the full amounts, unaffected by this employee private use. This is because the Tax Office views the use of the car by the employer as still qualifying as a "creditable purpose", and therefore entitling the employer to claim full input tax credits.
For the one third of actual expenses and the 12% of original value methods, you can make a claim of one third of the input tax credits included in the cost. With the logbook method, the percentage of business use determines the extent of input tax credit claim.
Since car expenses are the most claimed work-related expense, be sure to consult GJB on what constitutes an allowable claim and which of the four claiming methods will work out best for your circumstances. 02 9686 3130.
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