Don’t Miss Out On Car Deductions

Many people miss out on maximising work-related car expense claims due to inadequate record keeping. Failing to maintain a valid vehicle log book can cost you dearly if you are audited by the Australian Tax Office (ATO).

For the 2015/2016 financial year, the ATO introduced a change to the maximum amount you can claim using the ‘cents per kilometre’ method. It was reduced from $3,850 to $3,300 which is a substantial drop.

Advantages of a Log Book

Keeping a log book is now a more attractive method for many people. The logbook method is most advantageous if you travel a significant number of kilometres for work purposes during the financial year.

Using the logbook method, your tax deduction claim is based on your car’s business use percentage of expenses. These car expenses include fuel, repairs and depreciation.

A 12 Week Log Book Lasts for 5 Years

To be able to claim these expenses you need to keep a logbook for your car for a “typical” 12 week period. These must be 12 consecutive weeks (i.e. 12 weeks in a row), and must include every trip you take during that period, not just your business related trips. Remember driving to and from work is not included as work related.

Once you have kept the logbook, you can use your calculated percentage for 5 years, if your circumstances do not significantly change. You will need to keep receipts of all your motor vehicle expenses.

Comparing Logbook and Cents/km Methods

In this example, the logbook method gives an extra deduction of $2,100.

Logbook Method Example

After keeping a logbook for 12 weeks, Jill’s logbook shows she travelled a total of 11,000 kilometres with 6,600km being business related travel. Jill’s total car expenses, including depreciation, are $9,000 for the income year.

Jill calculated the percentage that the car was used for business:

6,600/11,000 × 100 = 60% To work out how much she could claim, Jill completed the following calculation:

$9,000 × 60% = $5,400 total claim

Compared to Cents Per Kilometre Method

5000km x 0.66 = $3,300 total claim

Clearly in this example, Jill would be better off keeping a logbook for the twelve weeks and using that method.

If you would like assistance with your car related expenses, please feel free to contact one of our accountants.

We are a small business accounting service located on the beautiful Sunshine Coast and would appreciate the opportunity to help you, your friends, family and colleagues. Contact us on 07 5451 1118 for an obligation-free confidential discussion today.