There are two types of motor vehicle deductions permitted to be claimed by the ATO, the cents per kilometre method and the logbook method.
Cents per kilometre method:
The Commissioner of Taxation has determined that the rate for work-related car expenses is 68 cents per kilometre for the income year commencing 1 July 2018 (currently 66c for the 2018 financial year)
This determination applies to eligible taxpayers who elect to use the cents per kilometre method when calculating income tax deductions for their work-related car expenses.
Under the cents per kilometre method:
- You can claim a maximum of 5,000 business kilometres per car
- You do not need written evidence to show how many kilometres you have travelled, but you may be asked to show how you worked out your business kilometres
- You cannot make a separate claim for depreciation of the car’s value
- This amount takes into account all your vehicle running expenses.
Logbook Method:
If this is the first year you have used the logbook method you must keep a logbook during the income tax year for at least 12 continuous weeks. That 12 week period needs to be representative of your travel throughout the year.
If you started to use your car for business purposes less than 12 weeks before the end of the income year, you can continue to keep a logbook into the next year so it covers the required 12 weeks.
Each logbook you keep is valid for five years, but you may start a new logbook at any time.
Logbooks can be tracked using available applications on smart phone devices or alternatively you can also use the “mydeduction tool” available in the ATO app.
Once you have established the business use percentage (total business travel / total distanced travelled by car over 12 weeks period) you are eligible to claim the following motor vehicle expenses:
- Registration
- Insurance
- Repairs and Maintenance
- Fuel & Oil
- Deprecation
- Interest, if any
What to record in your logbook?
Each logbook you keep must contain the following information:
- When the logbook period begins and ends
- The car’s odometer readings at the start and end of the logbook period
- The total number of kilometres the car travelled during the logbook period
- The business-use percentage for the logbook period
If you have any further question please feel free to contact the team at Melbourne Tax Advisory on 1300 942 230