Motor Vehicle Expense Deduction

A tax deduction for motor vehicles is available if you use a car to gain assessable income.
Deduction for car expenses may be calculated by using one of the following methods:

  • Cents per kilometre
  • Log book
  • 12% of original cost
  • One third of actual expense

When completing your tax return, we will consider your situation and claim car expenses by using the most tax effective method.

Cents per kilometre method:

Under this method, your claim is calculated by multiplying the number of business kilometers travelled during the year by the statutory rate as determined by the Taxation Office.

The rates for 2013 are:

Size of engine                                      Rate per kilometer

Up to 1600cc                                        .63 cents

1601cc – 2600cc                                 .74 cents

Over 2601cc                                         .75 cents

The maximum claim under this method is for 5000 kilometres regardless of kilometres travelled in excess of that figure.

If you have more than one car and have used that vehicle or vehicles for business trips and if you have travelled on business for more than 5000 kilometres in each car, you are then entitled to claim the statutory kilometre rate for each car.

You do not need to substantiate your car expenses under this method as the rate is taken as an average rate. You may be required to show how you arrived at your estimate of business kilometres.

Log book method:

This method can be used regardless of the number of business kilometres travelled.

Your deduction is calculated by multiplying the running costs of the car ( including depreciation ) by the business use percentage as indicated by the log book.

The log book must be maintained for a continuous period of at least 12 weeks. It must include part of the financial year. This log book can be used for up to 5 years’  of income tax returns provided the business usage does not change by more than 10% during those 5 years.

In most cases, a journey from home to a place of work or business is regarded as a private journey. During the log book period, the date, odometer reading for start and finish and purpose of the journey need to be recorded. It is not necessary to record private usage.

For all expense deductions, copies are to be kept of all expenditure and odometer readings be recorded at the 30 June each year. To calculate the fuel claim we are able to estimate the fuel costs if you have not kept records of this expenditure.

If you change your car during the year, you can continue to use the same log book.

12% of original value method:

You are able to use this method for claiming car expenses if your car travelled more than 5000 business kilometres in the one year. This can be pro-rated over the year if your car was acquired or disposed of during the year.

The 12% is taken on the purchase cost  (this capped at $57,466 being the luxury car limit) or in the case of a lease the market value of the car at the commencement of the lease.

A copy of the purchase contract would need to be kept for record purposes.

One third of actual expense:

You may use this method for claiming car expenses if you have travelled more than 5000 business kilometres in the income year.

The claim is one third of the running costs of the car for the financial year. Even if the car was not used for work purposes for the whole year, you can still claim one third of the total expenses for the entire year. This is available if the car travelled ( or would have travelled if owned for the whole year ) more than  5000 business kilometres in an income year.

Under this method you must keep all records of running costs of the car for the year which would include insurance, registration, servicing and financial repayments. Odometer readings should be recorded at the beginning and end of the financial year.

It is to be noted that if you have claimed GST on the expense then the amount which will be claimable will be the Ex GST figure.

Additional Notes:

If you have more than one job and are required to travel from your first job directly to your second job, you can claim a deduction for travel between jobs, but not from your second job to your home.

You are able to claim a deduction for travel to see your tax agent. This is not counted as travel towards your 5000 business kilometre limit.

We will help with your calculations at the time of preparing your tax return however if you have any queries relating this matter please call our office prior to the appointment, and we can advise you accordingly. Please bring with you your percentage of business use ( if working on log book method ) and a total of each expense so that we are able to prepare the working papers without too much fuss. Sighting of your log book would be helpful.

There are a number of issues that must be considered by every taxpayer wishing to claim a tax deduction for car expenses regardless of the method used.

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