The majority of taxpayers use their personal vehicles for work purposes but are you getting the most from a tax perspective when claiming deductions? Outlined below are two points to help maximize your claim.
1- Know the methods for claiming motor vehicle deductions and find out which one best suits you:
The ATO currently allows four different ways for the taxpayer to claim a motor vehicle deduction they are: Log book, Cents per kilometer, 12% of original value or 1/3 of actual expenses. It is important to know that to claim either the 12% or original value or the 1/3 of actual expenses method the taxpayer must have travelled at least 5,000Km’s (business related) in the financial year.
The log book and cents per kilometer method are generally the most widely used. Full substantiation of all expenses is required for the logbook method as these figures are used to claim the deductions on the car at the rate specified in the logbook of the taxpayer. To complete a valid logbook you must track all kilometers travelled in a 12 week period, both private and business with descriptions provided for all business travel. It is this percentage that is used to claim the vehicle expenses so the higher the business usage you can get the greater the claim can be made.
The cents per kilometer method is a lot simpler as the only substantiation required is a record of all the business km’s travelled for the financial year. The total of you kilometers (max claim at 5,000Km) are then multiplied at an ATO specified rate based on the engine capacity of your vehicle 75cents (2.601Ltr engine and above), 74cents (1.601 to 2.6Ltr) & 63cents (below 1.6Ltr).
2- Know what travel you can & cannot claim:
Knowing the travel that is deductible and what is not is crucial to maximising your motor vehicle deductions. The commute from home to work is generally not deductible, however in certain circumstances can become deductible. If for instance you are required to carry bulky tools or equipment with no place to store them at the work place this can open the commute from home to work as deductible travel.
Please note the ATO has issued a statement warning that travel with bulky tools will be a target for them in the 2014 tax returns, so any claim should be made carefully. The following types of travel can also be deductible for taxpayers:
– Attending conferences and meeting for work purposes
– Delivering supplies or collecting items
– Travel between two separate business premises or jobs
– Travel from home to an alternative workplace then back home
– Travel from work to an alternative workplace then back home
– Travel to meet clients or prospective clients
It is always best to take note of all travel completed during the year to ensure you get the most out of your motor vehicle expenses come tax time.
For more information on the motor vehicle expenses contact Brad Mur on (03) 9798 66 22 or email at Brad@zimsenpartners.com.au
About the Author
Brad has many year’s experience in Tax Accounting. Brad’s key clients range from Manufacturing, Residential and Commercial Construction, Service Tradies and Non-Profit Organisation.
This article was produced by Zimsen Partners. It is intended to provide general information only in summary format on accounting, business advisory and taxation issues. It does not constitute accounting advice, and should not be relied on as such.