This is one of our most commonly asked tax questions, and can have a significant impact on your tax refund. Claiming correctly for your particular circumstances is key to maximising your motor vehicle claim.
I have to drive a long way from my home to work. Can I claim my car?
Unfortunately, most people can’t claim for driving to and from work each day. It is classed as a private expense.
You can claim for your car if you have to carry bulky goods or heavy tools, or if you have to travel to clients, alternative work sites, or to different work places each day.
Whether you run a small business as a sole trader, or work for an employer, the rules for claiming are the same. However, if you run your business structure through a Company or Trust, and the Company or Trust owns the vehicle, you will need to consider how Fringe Benefit Tax rules apply to private car use.
Which method should I use?
Until recently, the ATO allowed you to choose from four different calculation methods. This has recently been reduced to the two most popular methods.
1. Cents per Kilometre Method
If your work related travel amounts to no further than 5000 kms in the year, you can use the Cents per km method. This is the easiest way to claim. You don’t need to keep receipts or a log book. A diary note of your trip stating the number of kms, and the reason for the travel is all that is required.
The ATO allows a set rate claim of 66c per kilometer for a maximum of 5000 km, regardless of the type of car you drive.
To maximize your claim, keep a diary note of every work related trip you undertake in the year.
2. Log Book Method
The log book method is the best method to use if you drive more than 5000 work related kilometres in the year, but this involves a lot more record keeping.
You will need to keep a log book for 12 weeks of the year – but you only need to do a new log book every 5 years. Record all your business trips during the 12 week period. Make a note of your Odometer reading at the start and end of the log book period.
Keep receipts for all your car expenses including:
- Petrol
- Registration
- Insurance
- Services, repairs and tyres
Also keep your car purchase documents including the loan documents if the car is financed.
We will use your log book to work out the business use percentage and apply that to all your car expenses to calculate your claim.
Discuss your car use with your AHBA accountant to see if you can claim for the use of your car, and to which method is more appropriate for you.