Maximising Your Tax Benefits for Vehicle Expenses

As a tax agent, a frequent topic of discussion with clients is the deductions available for car expenses. Whether you use your car for business, work, or certain other purposes, understanding what you can claim can significantly affect your tax return. Here’s a guide to the types of car expense claims that might be available to you.

1. Business Use of Personal Vehicle

  • Eligibility for Deductions: If you use your personal vehicle for business purposes, you may be eligible to claim certain expenses. This does not include commuting to and from work.
  • Types of Deductible Expenses: These may include fuel, maintenance, repairs, insurance, registration, and depreciation.

2. Methods for Calculating Car Expenses

  • Logbook Method: This method involves keeping a detailed logbook for a continuous 12-week period to establish the business-use percentage of your vehicle expenses.
  • Cents per Kilometre Method: Alternatively, you can use a fixed rate for each business kilometre travelled, up to a certain cap, without the need for a logbook.

3. Record-Keeping Requirements

  • Maintaining Records: It’s crucial to keep accurate records to substantiate your claims. This includes receipts, logbooks, and a record of kilometres travelled for business.
  • Logbook Validity: A logbook is generally valid for five years, but a new logbook must be kept if your business use significantly changes.

4. Claiming Depreciation

  • Depreciation on the Vehicle: If you’re using the logbook method, you can claim depreciation (decline in value) of your car as part of your car expenses.
  • Depreciation Calculations: The calculation of depreciation will depend on the cost of your car and the date of purchase.

5. Leased Vehicles

  • Lease Expenses: If you lease a car for business purposes, you can typically claim the lease payments as a tax deduction.
  • Lease vs Buy: The decision to lease or buy a car can have different tax implications, and it’s worth discussing this with a tax professional.

6. Other Considerations

  • Travel Between Workplaces: Travel between different workplaces or locations can often be claimed.
  • Non-Deductible Travel: Generally, travel from home to work (and vice versa) is not deductible, except in specific circumstances like carrying bulky tools or equipment.

7. GST and Car Expenses

  • Business Registrations: If you’re registered for GST, you can claim the GST included in the price of any car expenses as an input tax credit on your business activity statement.

8. Seeking Professional Advice

  • Complex Tax Laws: Car expense claims can be complex, and tax laws change regularly. Consulting with a tax professional ensures that you understand your entitlements and obligations.

Car expense claims can provide significant tax advantages, especially if you use your car for business purposes. Understanding which expenses are deductible, how to calculate these deductions, and the importance of maintaining accurate records are key to maximising your tax return. It’s always recommended to seek the advice of a tax professional to navigate the complexities of car expense claims and ensure compliance with current tax laws.