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May 16, 2019

Claiming a motor vehicle for work-related purposes

Small Business, Tax Deductions, Women in Business

If you operate a business as a sole trader or partnership (where at least one partner is an individual) you can claim a deduction for the business use.  If the motor vehicle is used for business and private use, you must reduce the claim for any private use.

There are two ways to claim work related motor vehicle expenses, cents per kilometre method and log book method.

Under the cents per kilometre method, you can claim a maximum of 5,000 business kilometres per car and you do not need written evidence to show how many kilometres you have travelled.  However, you should be able to substantiate how you worked out your business kilometres.  This may include a calendar or diary that shows your work-related travel.  The rate set by the Australian Taxation Office covers all running expenses and depreciation.

The rate set by the ATO for the 2018/19 year is 68 cents per kilometre.  To calculate your claim for 2018/19 multiply total business kilometres by 68 cents.

For claims in excess of 5,000 business kilometres, you can use the logbook method or claim the actual costs.

Under the logbook method, you are required to keep a logbook. The logbook must contain:

  • The period to which the logbook relates.
  • The car’s odometer reading at the beginning and end of the logbook period.
  • The total number of kilometres travelled during the logbook period.
  • The calculated business use percentage for the logbook period.
  • The details of each journey made during the logbook period. Start and finish date of the journey, odometer reading at the start and finish of the journey, kilometres travelled and the reason for journey.

The logbook must be kept for a period of at least 12 continuous weeks during that financial year and the 12 week period must reflect your travel throughout the year.

If you have started using your car for business-related purposes 12 weeks before the end of the income year, you must continue to keep the logbook into the next financial year, so it covers the 12 week period.

Each logbook is valid for five years.  If your business-related travel changes, you can start a logbook at any time.  If you are relying on a logbook from an earlier year, you must detail the odometer reading at the beginning and end of financial year.

If you are using the logbook method, you are required to keep tax invoices for car related expenses.  For example, if your business use percentage is 67% and you purchase fuel worth $100 you multiply $100 by 67%.  Therefore $67 is tax deductible.  If you are registered for GST you can claim an input tax credit on the $67.

 

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