Motor Vehicle Deductions In 2024
With a range of motor vehicle expenses being tax deductible, your car could end up being a tax deduction, maximising your tax refund, particularly if you regularly drive your personal vehicle as part of your work related duties. Knowledge of all the available deductions can ensure that your vehicle is working as hard as you are!
Below we have put together some helpful tips and a logbook template to ensure you are claiming everything you are entitled to when it comes to your motor vehicle deductions.
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Criteria Of Motor Vehicle Deductions
There are a few guidelines to keep in mind when claiming motor vehicle expenses:
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You can claim the cost of using your private motor vehicle, as long as you use it for work purposes. This extends to all types of vehicles, including cars, station wagons, utilities, and any other vehicles that are designed to carry less than one tonne, or fewer than 9 passengers.
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You cannot claim for the cost of motorcycles, taxis, panel vans, and other types of vehicles that are used only for business purposes, such as trading stock and rental cars. Expenses related to these types of vehicles must be claimed as a business expense.
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Don’t forget to separately claim for car parking and tolls. Even though a taxpayer electing a km based motor vehicle claim is not entitled to claim ordinary car expenses, such as depreciation, petrol, repairs and ordinary running costs, it is permissible to separately claim for car parking and tolls provided they have been directly incurred in earning the taxpayer’s current assessable income.
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How To Calculate Motor Vehicle Expenses
There are two ways to calculate work-related car expenses on your tax return:
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Kilometre based method
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Logbook method
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As of the 2024 financial year, the ATO has set one fixed rate for all cars. This rate currently is 85 cents per km.
The calculation method used will depend upon your individual circumstances. In some cases, the cents per kilometre method can reduce the amount that can be claimed as a tax deduction. This is why we recommend using the logbook method.
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Regardless of which method is used, substantiation of expense amounts and distances travelled for business is required.
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Car Logbook Method
A few things to keep in mind if you opt to use the car logbook method:
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You must be the owner of the car for which you wish to claim expenses
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You must keep a logbook for 12 continuous weeks, this logbook will be valid for five years
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You must record all trips taken in the car, both work-related and personal
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You must keep receipts for all car-related expenses including insurance, servicing costs, registration and any other running costs.
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Your logbook must also contain the following odometer records:
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The make, model and registration number of the car
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Odometer reading at the beginning and end of the 12 week logbook period
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Odometer reading at the start and end of the financial year
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Once you have completed your logbook for 12 continuous weeks, you will be able to easily determine how much you used your vehicle for work purposes. Then, you can simply claim the business percentage of all expenses related to your car.
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Remember a logbook does not have to be recorded every year. The business percentage is valid for five years, that is, the year that the log book is kept and the subsequent four years. Once a taxpayer has established the business use percentage, they are not required to complete a new log book unless required to do so by the legislation, or otherwise directed in writing by the ATO.
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If you start using a new car for work-related purposes, you may nominate a new car to replace an existing car. This nomination must be made in writing and takes effect from the date specified in the nomination. After the nomination, the replacement car is treated as the original car and the taxpayer will not need to keep a new log book for the replacement car. The nomination must be completed before lodging the taxpayer’s income tax return for the relevant year.
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It is important to note that the two deduction methods outlined above, and the applicable substantiation rules, do not apply to the following vehicles:
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a vehicle that is not a ‘car’ (e.g., a panel van designed to carry a load of one tonne or more);
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a vehicle that is a ‘car’ and that is used only for producing the taxpayer’s assessable income, and for travelling between home and work, where the taxpayer chooses to calculate their deduction under the normal deductibility provisions instead of using one of the two methods outlined.
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a car used only for lease or hire in a business of leasing or hiring, or a car an employer provides for ‘exclusive use’ of an employee for non-business purposes which is subject to Fringe Benefits Tax.
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Cents Per Kilometre Method
Some guidelines for the Cents Per Kilometre Method:
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You can only claim up to 5,000km per year using this method.
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You do not have to keep a vehicle logbook
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The ATO can ask you to explain how you calculated your claim
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The ATO can ask how you used your car for work-related purposes.
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You can claim $0.85 per work-related km
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When Is A Motor Vehicle Expense A Tax Deduction?
Eligible work-related motor vehicle expenses includes:
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Travel between work locations
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Travel to attend meetings, conferences and training courses
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Travel to attend client and customer meetings
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Travel to pick up goods, supplies or equipment for work
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Travel between home and your usual place of work is considered private travel and is not a tax deduction. This includes situations where minor work-related tasks are completed between home and work, such as collecting mail, trips to work outside of normal office hours and situations where you are on call. However, travel between home and work can be claimed where:
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You are required to transport bulky items to and from their usual place of work where there is no reasonably secure storage provided on-site. Bulky items include heavy equipment, ladders and any other items that cannot be easily transported using public transport.
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You are required to travel to an alternative location for business purposes, such as a client meeting, prior to arriving at your normal place of employment.
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You are on-call, and your work is deemed to have commenced before you leave your home. This includes emergency services, such as doctors or nurses providing directions while in transit.
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Speak to a Tax Specialist today to ensure you are claiming all the motor vehicle expenses you are entitled to!
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LAST UPDATED: 25/12/2023