It's tax time again in Australia, and soon we'll be receiving our group certificates and lodging our FY15 tax returns. It's a time to go through our finances, and find all those deductible expenses we incurred over the last 12 months. While preparing our taxes, a lot of Australians will be asking 'Can I claim a tax deduction for my car expenses?'
We thought we'd have a streetonomic look at how to figure out if you can claim a deduction for you personal vehicle. Remember, we are not tax professionals, we are just using the information provided by the Australian Taxation Office on their website. Please don't lodge tax returns based on what we say, consult a qualified tax expert :) We will look at:
Can I Claim a Tax Deduction for my car?
If you commute a long distance for work, the bad news is, that your daily drives between home and work are generally not tax deductible. To claim a tax deduction, you must use your car as part of doing your job. This could be for any number of reasons including travel for:
- To Make Deliveries or Collections
- Going to an alternate work location (from your regular location)
- Going between jobs (for those of us who work more than one)
How I Do Claim a Tax Deduction for my car?
If you use your personal vehicle for work purposes, then you should consult with an expert as to whether or not you can claim a tax deduction. If you do qualify, then it's as simple as filling in the correct boxes on your tax return. You will need to know how many kilometres you have driven for work, and have records of your car expenses for the year.
There are four different ways to claim car expenses as a deduction. Each have different requirements regarding providing evidence of your expenses or a logbook. Which option is best for you, will depend on how much you use your car for work. The four options are:
Cents Per Kilometre
If you use your personal vehicle for up to 5,000 of work related travel, then you might be entitled to claim a tax deduction. The amount you can claim depends on how many kilometres you have driven in the financial year, and what size engine your car has. The amount you can claim per kilometre is shown below:
Cents Per KM is convenient if you are claiming less than 5,000 kilometres of work travel. You do not need to provide a logbook or any evidence of your expenses. You will get a fixed rate per business kilometre traveled, which can be estimated with our cents per km calculator. You should note that if you use this method you can not claim any depreciation deductions for your car.
12% of Original Value
If you have traveled more than 5,000 kilometres for work, then you might want to use this method. You can claim a deduction for up to 12% of the original value of your car. However this is limited to a value of $57,466 for FY15. The maximum deduction using this method for more expensive cars will be $6,895.92.
If you use this method, you do not need to provide a logbook or evidence of your expenses, but you might be asked to show how calculated your business kilometres. The 12% original value method, can be used if your car was leased. You just apply the market value at the time you commenced the lease
One Third Actual Expenses
To use this method, you must have driven more than 5,000 kilometres for work. To use this method you must provide:
- Evidence of all your car expenses
- Odometer readings for the start and end of the financial year
- Your cars engine capacity, make, model and rego
- A copy of the calculations you used to find your business usage kilometres
This method can be used with a lease. It is convenient for those who have traveled more than 5,000 kilometres for work, but might not have a detailed logbook.
Keeping a Logbook
If you have been organized enough to keep a logbook, then this will be an option for you. This method will allow you to claim the business use percentage based on your logbook records. To claim a deduction using this method, you will need to keep:
- A detailed logbook showing odometer readings for both work and personal use
- Written evidence of all your car expenses
This is the most accurate method for determining what tax deduction you can claim for your work related car expenses.
Which Method Should I Use?
The obvious answer would be 'the method which you are qualified for and gives you the largest tax deduction'. If you are unsure which method is right for you, or whether or not you have adequate evidence, please consult a tax professional.
If you are entitled to a deduction using this any of the above methods, this shows you how much you can reduce your assessable taxable income. (ATI) The amount you receive on your tax return will depend on your final ATI after all deductions, and which income bracket you are in.
If you know most of your information, and have a group certificate, then we've built a calculator to help you estimate your FY15 tax refund. This calculator was built by The Finance Guy and is not an official tax tool, it is intended only to provide rough estimate.
We hope this information has been useful. If you do qualify to claim a tax deduction for your car, let us know which method you used. We welcome all feedback, so please feel free to post any questions or comments in the section below