Cars and Tax
I’m sure you’ve been told at some point in time that you can claim ‘this and that’ car related expense, or that petrol can be claimed if you’re driving to work! Unfortunately there’s more than a tinge of urban myth surrounding tax and cars, with nobody quite sure what can or can’t be claimed.
To put it simply, if you are driving your own car for work-related duties (including a hire car), you are able to claim some expenses as ‘car expenses.’ The use of the car must be required for you to perform your role and doesn’t include private travel (to and from work is classed as private… Dang!). Some examples of this type of travel are noted below;
– When your vehicle is needed to transport equipment or tools
– Travel between workplaces/worksites
– Travel to clients
– Travel to and from meetings and conferences
Basically, any kind of driving that you need to do to fulfil your work duties.
If you use someone else’s car for these purposes, you can claim back travel related expenses (such as petrol or tolls) but not any car related expenses.
After the 2015-16 financial year began, the ways to claim your car related expenses have thankfully been condensed down in to two easy to understand methods. The method that you will choose depends on your circumstances and you will need to consider your needs when picking what works best for you!
Cents per kilometer method
Basically, you figure out how far you travelled for work (up to a limit of 5000km/year) in that financial year. You can then claim a deduction of 66c/km on all business related travel. You don’t need to have precise documented evidence, however you should be able to show how you came to your km/year figure. Diary evidence of business trips and approximate km will suffice.
Log book method
You will need to keep a log-book of your exact business travel (including odometer readings for each trip). You can claim a percentage (calculated by using your business km as a percentage of total distance the car has traveled in the year) of all running costs and depreciation of value of the car in that financial period. Fuel and oil costs can be calculated using exact receipts or estimated by using the logged km’s. You will need to have written evidence documenting your ability to claim these deductions. Luckily, there are a number of apps available to minimise the amount of paper that you need to use to keep track.
If your business is registered for and pays GST, you can also claim a credit for the GST paid on your vehicle. You must be able to provide a tax invoice for your vehicle. There are different calculations for different uses of the vehicle and is heavily dependent on the personal and business use that you record for tax purposes.
It’s always best to seek expert opinions when you’re not sure with your tax, especially as there are many rules and regulations surrounding the taxation of your car. Your accountant will be able to advise you on the ways to get the most out of your vehicle, reducing your tax and claiming back everything you’re entitled to.