How to claim vehicle deductions for the 2015-2016 tax year

Car expenses are one of the biggest tax deductions for businesses each year. Due to the number of people who are claiming on their cars, the ATO are diligent in regulating car deductions. As a result it’s very important you know your stuff when it comes to claiming on your vehicle.

Read on to learn more about how you can claim car related business deductions legally and within the ATO’s strict guidelines.

Summary of what you can claim

In short, you can claim deductions that are a direct result of producing assessable income. There are some exceptions to this rule and to be compliant in terms of tax, make sure you know what these are to gain maximum benefit from your tax return each year.

Speak with an accountant

It’s best to speak with an accountant. Tax rules are complex and change regularly. Don’t waste precious business time trying to learn all the tax rules. Accountants regularly keep up with these rules so you can get on with working on your business. Your accountant will give you direct instructions on what you need to do and the best method for claiming business related car expenses.

Know the ATO’s new methods

In the past, there were four methods the ATO used for car expenses and deductions. However, as of 1 July 2015 this changed and there are now only two available methods.

These are:

  1. Cents per kilometre (with some changes)
  2. The logbook method (with no changes)

Cents per Kilometre method (Source: ATO)

  • Your claim is based on 66 cents per kilometre for 2015–16 income year
  • You can claim a maximum of 5,000 business kilometres per car
  • No written evidence required but you need to be able to show your workings (e.g a diary of work-related trips).

Logbook Method (Source: ATO)

  • Your claim is based on the business-use percentage of the expenses for the car.
  • Expenses include running costs and decline in value but not capital costs, (e.g purchase price of your car, the principal on any money borrowed to buy it and any improvement costs).
  • You need a logbook and the odometer readings for the logbook period.
  • The logbook period is a minimum continuous period of 12 weeks.
  • You can claim fuel and oil costs based on either your actual receipts or you can estimate the expenses based on odometer records
  • You need written evidence for all other expenses for the car

What you can claim

Work-related car expenses can be claimed if you use your own car for performing your job as an employee doing any of the following:

  •  Carry bulky tools or equipment
  •  Going to conferences
  •  Going to meetings
  •  Collecting supplies
  •  Delivering items
  •  Travelling between two different places of employment or workplaces

Note: You must declare any travel related allowances from your employer on your tax return

What you can’t claim

Most people (unless doing or carrying the items above) are not able to claim the cost of travel between work and home as this is classed as ‘private.’

Owned or leased cars

The good news is that if you own or lease the car you are driving – you can make deductions using the Cents Per Kilometre or the Logbook method. You must be making payments on the initial purchase (lease, hire purchase, loan or other). You may also claim if you have a private payment arrangement (but you are not registered owner) – if you make the payments and pay the expenses on the vehicle.

Know your stuff: Read more at the ATO's official car deductions page