If you use your own car in performing your work-related duties, you may be able to claim a tax deduction for car expenses. However, many people claim more than they're entitled to, or less, because they aren't sure of what they're allowed to claim.
When can you claim?
If you use your car for work purposes, you can claim a tax deduction using one of two calculation methods (more on that below). General situations in which you can claim car expenses include:
- using your car in the course of performing your work duties
- attending work-related conferences or meetings away from your normal workplace
- traveling directly between two separate places of employment and one of the places is not your home
- traveling from your normal workplace to an alternative workplace and back to your normal workplace
- traveling from your home to an alternative workplace and then to your normal workplace
- performing itinerant work
But remember, you can't claim deductions for normal daily journeys between your home and your workplace (except in very limited circumstances) or for expenses that have been salary sacrificed or been reimbursed. Also, if any part of the travel was private in nature, you are only entitled to claim the work-related portion.
The calculation methods
There are two methods of calculating your car expenses and therefore and subsequent tax deduction.
The first is cents per kilometre. You can claim up to 5,000 business kilometres a year using this method, based on an an expense of 68 cents per kilometre (for 2019). You do not need to keep written evidence but you must be able to show how you worked out the number of business kilometres e.g. diary records of work-related trips.
The other method is the logbook method. This is based on the business-use percentage of expenses for the car. To work this out, you must keep a logbook for a minimum continuous period of 12 weeks detailing the odometer readings before and after each trip and which trips were work-related. This is then used to calculate your business-use percentage, and can be used for 5 years. Expenses you are able to claim include running costs such as fuel, insurance, repairs, interest on a loan and registration fees, as well as decline in value. You must have written evidence of all expenses to use this method.
The ATO app's myDeductions tool can be used to record work-related car trips and other car expenses.
Other travel expenses
You can also claim other travel expenses related to earning your income including road tolls and parking. You must keep receipts for these expenses and apportion them depending on which were work-related and which were private, similar to other car expenses. Note that the business-use percentage for tolls and parking may not necessarily be the same as that for your car expenses calculated using the logbook. You need to be able to accurately calculate the business-use percentage and indicate the route for a particular toll was work-related.
We understand that this can sometimes be confusing, so if you have any questions about work-related car expenses, please give us a call.