Do you incur motor vehicle and travel expenses such as tolls and taxi fares which directly relates to the occupational duties you are in? Does your job require you to use your own vehicle to perform work related tasks? If you have answered yes to either or both, keeping in mind your employer hasn’t already reimbursed you, you may be eligible for a tax deduction!
Motor Vehicle Deductions
Motor vehicle expenses are one of the most commonly claimed deductions as reported by the ATO. So, it’s important that we Australian taxpayers know exactly what we can and can’t claim as a deduction to avoid any errors in our 2019 tax returns.
There are two methods which can be applied to claim motor vehicle expenses. The first is the logbook method which is based on the work-related proportion of expenses for the use of your car. This approach involves working out your business use percentage by keeping a running logbook for a minimum period of 12 consecutive weeks and recording odometer readings throughout the period to work out your work related percentage of your motor vehicle use. Your logbook is valid for 5 years, therefore is worthwhile for you to invest some time in producing a logbook especially if you incur high motor vehicle costs due to work related travel. You may claim a deduction for running expenses such as fuel, insurance, registration and depreciation costs of your motor vehicle, based on actual costs incurred. For all expenses claimed you must have substantiating receipts or records to be eligible for a tax deduction. Although bear in mind the purchase price, principle repayments on any loans taken out to acquire the vehicle and improvement costs are not eligible for motor vehicle deductions.
The second method is the ‘Cents per kilometer’ method which is more straight-forward and as of the 2019 financial year is based on 68 cents per kilometer of work-related travel. To substantiate claims using this method you need to be able to show how you calculated your business kilometers, such as having a diary record of work related trips during the given year. This method is helpful for those who haven’t had the chance during the financial year to keep a log book for a 12 week period, although claims are limited to a maximum of 5,000 business kilometers per car per year.
To note: Not all travel which links to work is tax deductible as we can only claim motor vehicle expenses for work related duties undertaken during the course of your workday such as driving to client meetings or a seminar. This does not include the use of your car driving between your workplace and home as this is considered private use of your motor vehicle and therefore non-tax-deductible.
Work related travel costs you incur whilst performing your occupational duties as an employee may be tax deductible. As travel expenses can be quite costly, it is important that you keep your receipts and recommended that you have a diary record which is up-to-date so you remember to include all expenses incurred during the financial year and to also substantiate your tax-deductible claims.
Some expenses which are eligible for deduction include:
– Taxi fares
– Hire car charges
– Accommodation and meals
– Incidental expenses which are work-related
Reminder: It is essential that you only claim a deduction for costs incurred which were not reimbursed by your employer!
We hope our advice on motor vehicle and travel expenses has helped you. If you need further clarification or simply want to share your thoughts, please don’t hesitate to email one of our friendly staff members, we would love to hear from you!