Changes To Claiming Business Use For Your Vehicle

Posted Under: Accounting and Taxation Posted On 09/12/2015

Almost four million Australians claim a work-related car expense deduction each year. Are you one of them? Claiming car expenses legitimately assists people who incur insurance, registration, repair, fuel and other costs in carrying out work-related activities.  Anyway, what are the changes?

Firstly though, this applies to you if you own a car (including under finance or leased) that you claim business expenses for, not salary packaged cars.

Secondly, a work-related car expense claim is a tax deduction in relation to a car which is used for business or income producing purposes. Just so you know, travel directly between home and place of work, and the return trip are considered to be not deductible, but there are exceptions.

Thirdly, this change was initially proposed in the 2015 budget and the legislation has now been passed, so the amendments apply to this financial year, 2015 16.

OK, so there used to be several car expense claim methods, each involving different levels of record-keeping.

The Cents per Kilometre Method – The rate used to vary based on the engine size of your vehicle, but it is now set at 66 cents per kilometre (up to 5000 km without a log book) giving you a possible maximum tax deduction of $3300. (The 66 cent rate comes from Motoring Association data which shows that the average running cost for the top five selling motor vehicles is 66 cents per kilometre. This would see those who drive smaller vehicles getting a slight increase in deductible expenses, and those who drive larger cars having a decrease in their deduction.)
Log Book Method – If you do more you than 5000 km you will benefit from keeping a log book for 12 weeks so that you can claim more. You will also need to provide a speedo reading at the beginning and end of financial year.
12% of Original Value Method – from 1 July 2015 is discontinued.
1/3rd of Actual Expenses Method – from 1 July 2015 is discontinued.

Interestingly, only 2% of claims were previously using the 12% of original value method or the 1/3 of actual expenses method, so this is why both these methods were discontinued.

Of course, if you have any questions about which method is best for you, just give us a call at A Counting House on 07 55261855.