Changes to Motor Vehicle Tax Deductions
Claiming motor vehicle expenses on your tax return? It is important to be aware of recent changes made by the Australian Tax Office, writes Adelaide accountant Tony Vroulis.
Work-related expenses for vehicles are commonly claimed as tax
deductions. So common, in fact, that the Australian Taxation Office (ATO) has
started cracking down on vehicle claims reported in just about every line of
The focus is mostly on very high work-related car expenses reported. The ATO is also scrutinising claims that an employer has already reimbursed someone for and claims for private expenses (such as travel between home and work).
There have been some changes in the way the ATO will allow you to claim work-related expenses you incur when using a motor vehicle.
Understanding the Changes to Motor Vehicle Expense Claim Methods
How to Report
The ATO considers travel between your home and normal place of work to be of a private nature. Expenses that can be considered work-related travel include:
o Traveling for conferences and meetings outside of your normal job location and hours
o Using a motor vehicle to transport large loads of tools or materials for work
o The distance traveled between two separate jobs
Before 1 July 2015, you could have chosen between four different methods for claiming your work related car expenses. Now, you can decide between two options:
o 66 cents per kilometre
o Logbook method
The cents-per-kilometre method is standardised, meaning that this is the only way you can calculate your expenses, regardless of vehicle-type.
The owners of smaller vehicles will get more of a deduction than those with larger cars as the costs incurred running a smaller vehicle are traditionally less. If you feel that 66 cents per kilometre is shorting you on your deduction, then the logbook method is your only other option. As long as you are willing to put in the effort to keep good records, then a logbook is the best way to fairly account for all your work-related vehicle expenses.
Successfully Using the Logbook Method
A logbook will keep track of all the distance you traveled for work related purposes. A logbook should report information such as:
o The starting and ending dates of the log
o Distance traveled in kilometres
o Beginning and ending odometer readings for each trip
o The reason for each trip (private or business)
o When each trip began and ended
Your logbook must be a report of at least 12 consecutive weeks that accurately reflect how the vehicle is used for work related travel during the majority of the year.
The logbook will help you determine the percentage of your vehicle's use that can be reported as work-related use. This percentage is good for up to five years, as long as your work circumstances remain consistent.
What Expenses can you Claim?
Fuel and oil use are the main areas of concern. These can either be reported with written documentation (receipts), or estimated based upon odometer readings. All other expenses must have written evidence such as receipts.
Not everything that you may consider an expense can be reported for a business-related tax deduction. Make sure to check in with your accountant or the ATO's policies to find out what can or cannot be reported.
Electronic Record-Keeping with Logbook Apps
After deciding to go with the logbook method, how do you get started?
You can design your own book out of a simple notepad. Shop around at stationary suppliers for a ready-made and organised logbook.
Many people are now looking to electronic logbooks in the form of apps. These apps are usually more convenient, organised, reliable, and secure than a hard-copy. Here are just a few options:
Logit - This popular app makes good use of your smartphone and GPS to log journeys and calculate distance. Logit is ATO-compliant and available for iPhone and Android. You simply push a button to start recording your journey, or manually enter the distance at another time.
VehicleLog - iPhone-friendly with a GPS feature. VehicleLog syncs well with iPhone to match up business travel with calendar events. You can work directly inside the app, eliminating the need for filling out any other paperwork. Send the calculations directly to whomever you need to.
LogbookMe - Also ATO compliant, this system comes with cloud storage. After setting up an account, a special device plugs directly into car and sends travel data back to you. You can sort through data later on to classify it as either personal or work-related. This program's smartphone app integrates with your calendar to remind you what trips were made for and can even be used to track your vehicle if you forget where you parked it. This feature could also be a valuable tracking tool if your car is stolen.