Factors to consider regarding claiming expense of motor vehicles as deductions
As per the Australian Taxation Office, claiming vehicle related deductions during income tax filing is permitted. However, things are not simple to manage as several aspects relate to this. Not every individual who owns a car can file a claim under income tax. But if you are using your vehicle for work purposes, you can claim the cost related to it. However, for claiming motor vehicle deductions, it should be your personally owned car. If the car is owned by your employer and is included in your salary package, you can claim nothing. Kirpa Tax Accounting helps you navigate procedures to claim vehicle-related expenses.
Procedure I – Cents Per Kilometre of Travel
You can claim expenses based on a set rate of your traveling for business. By following this method you can only claim the cost for a maximum of 5000 km per year for each vehicle. But if your travel for work exceeds 5k kilometres, you cannot use this method. We are here to assist you to maximize your refunds which include travel expenses and depreciation. However, you have to prove the km traveled on which you can claim the expenses. You can keep the record in a work diary and use the information for filing your income tax return. You can compute deductions by multiplying 5000 by 85 cents for the 2024 tax year. In 2025, this will exceed 88 cents.
Procedure II – Use a Logbook
This method enables you to claim expenses as per business use percentage of vehicle expenses. You must keep the record of travel in a logbook for at least 12 weeks. Through the records of the logbook, you can claim expenses relating to travel by using your car. However, your logbook must have a record for journeys made in the car over the 12-week period stating:
- The period of the logbook beginning and end
- Odometer readings at the beginning and end of the trip
- Total number of kilometres traveled
- Business percentage for the logbook period
Expenses you cannot claim for the vehicle as per ATO
We also inform you about the expenses you cannot claim for vehicle deductions. However, in case you want to raise a query to ATO, we serve you with letters drafting. You can get the required information from income tax authorities if you are not satisfied with any expense claim rejections. However, you cannot claim some of the deductions such as:
- Using a vehicle to travel from home to work and back
- Using a vehicle during overtime due to unavailability of public transport
- Using a vehicle to do minor tasks on the way such as picking up mail
The final words
As you can see how the legal procedure by ATO works for motor vehicle deductions. So, at Kirpa Tax Accounting we help you throughout the process of filing your income tax precisely. We are professional tax accountants and have expertise in individual and business tax filing.