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Dear Internet Client
RE: Motor Vehicle Expenses
There are various methods to claim for your motor vehicle expenses They all
produce a different result and will suit different circumstances.
Cents per kilometre
By far the easiest method is simply to estimate your kilometres travelled for
work, and multiply that by a set rate determined by the tax department,
dependant on engine size.
If you estimate your travel at 3500km during the year, under this method we
would claim 3500 x .538 = $1883.
This method is limited to a claim of up to 5000km and is not appropriate if
your car usage is well above this or the costs of your car are very high. No
receipts and no log books are required.
Log Book
If you want to claim for the actual costs of running your car, then not only
must you keep the receipts as evidence of any expenditure but also a log book to
verify the business usage of the car.
You need to maintain a daily log book or similar document in which you enter
details of each journey:
-
date of the journey
-
odometer readings at the beginning and end of the journey
-
number of kilometres travelled
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purpose of the journey
-
name of the driver
-
date on which the entry was made
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name of the person making the entry.
The entry must be signed by the person making the entry.
The log book must be kept for a minimum continuous period of 12 weeks in a
year, and if you use more than one car for business purposes, you must keep a
log book for each car for the same continuous 12 week period.
Once a book is prepared, you will need to update it every five years,
but
earlier if :
-
You want to increase the business percentage that you can use.
-
If, on a reasonable estimate of your business use, your business use has
decreased by more than 10%. You must then maintain a log book for another 12
week evaluation in the following year if you want to continue to use the log
book method.
-
You used the log book method last year but the number of cars which you are
using to produce assessable income has increased (not counting a replacement
car).
-
Your car expenses claim last year was reduced by the
ATO.
The Commissioner of Taxation has said that you must.
This method sounds a little draconian, and it is a chore for the 12 week
period, but will often yield a claim well in excess of any other method. If you’re
prepared to go through the pain of keeping the book, you may substantially
increase your refund, when compare to other methods.
Fuel Receipts
As mentioned you will also need to keep receipts to verify expenditure. The
exception being fuel, for which an estimate can be made by recording the
odometer reading at the start and end of the year and estimating the fuel usage
and therefore cost.
The easiest way to keep a book is to obtain a log book from the local
newsagents. They are set out with all the details required, and will look
something like the example on the following page. Make sure you complete the
book thoroughly or the department may not allow the deductions.
Other methods
If you travel over 5000km but don’t keep a log book, you are able to claim
under one of two other methods :
-
1/3 of the car expenses. Receipts must be kept.
-
12% of the vehicle purchase price.
Neither method is used often and I would recommend the log book method in
preference.
Should you have any queries or need any further information regarding the
above please do not hesitate to contact
me.
Click here for a ready made vehicle
log sheet
to keep in you vehicle
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