Demystifying Motor Vehicle Tax Deductions

Understanding the ins and outs of claiming car expenses can be a game-changer for your financial situation. In this article, we'll address common queries surrounding motor vehicle tax deductions, including eligibility criteria, parking fees, commuting expenses, calculation methods, and record-keeping requirements.

Eligibility Criteria for Claiming Car Expenses:

If you use your car for work purposes, whether owned, leased, or financed, you may be able to claim various running costs, including petrol, registration, servicing, insurance, repair costs, and depreciation.

However, you cannot claim, expenses that have been reimbursed by your employer, or costs associated with personal travel.  Commuting to and from work is generally not deductible unless specific circumstances apply, such as home-based businesses or travel between workplaces.

Calculating Your Tax-Deductible Car Expenses:

You can calculate your tax-deductible car expenses using two methods:

Cents Per Kilometre Method: This method applies a flat deduction rate per kilometre, up to a maximum of 5,000 kilometres. For instance, in the 2023/24 financial year, the rate is 85 cents per kilometre.

Logbook Method: Suitable for claiming expenses exceeding 5,000 kilometres of business travel annually, this method involves keeping detailed records of your travel over a continuous 12-week period. You can then determine the percentage of work-related car use and deduct accordingly.

If the motor vehicle is owned in a business entity it is important to account for the private use as well.

Record-Keeping for Car Tax Deductions:

Logbook Method

To claim car tax deductions, you need to maintain records of actual motor vehicle expenses and keep a 12 week logbook that details your work-related trips if your vehicle serves both private and work purposes so we can determine the work related percentage. These records should be retained for at least five years after submitting your tax return. Note: You would need to keep individual receipts for all motor vehicle expenses under this method as we are claiming the relevant percentage of each cost.

Cents per KM Method

If you are claiming using the cents per kilometre method we will need to see the log of all work related trips and corresponding kilometres each year (up to 5000km). Note: You would not need to keep individual receipts for expenses under this method.

Claiming Parking Fees and Commuting Expenses:

Work-related parking fees and tolls may be tax-deductible but are claimed as travel expenses, not car expenses

Seek Professional Guidance:

Understanding motor vehicle tax deductions is crucial for optimizing your tax return. By adhering to eligibility criteria, selecting the appropriate calculation method, and maintaining accurate records, you can make the most of available deductions while remaining compliant with tax regulations. Reach out to our team for personalised guidance tailored to your tax needs.

Disclaimer: The following information is general information only and is not and does not constitute advice. If you rely on the information herein, you do so at your own risk. For tailored advice for your specific situation and circumstances, please contact us directly.