Many Australians are required to drive regularly for work purposes. Depending on your situation, you may be able to claim related car travel deductions for work within your next tax return. Here, we will outline the basics of claiming your travel deductions to the Australian Taxation Office (ATO).
Travel deductions for work purposes generally apply to trips made within fulfilling your duties. For instance, many sales representatives tend to drive throughout their workday to many different places for work purposes. While they can claim these trips as travel deductions in their tax return, their claims cannot include their trip to and from their primary workplace (say, their sales office).
How to Claim Travel Deductions for Work
There are two methods to claim car travel deductions for work:
Cents Per Kilometre Method
Through this method, your claim is based on a set rate for each business-related kilometre driven, with a maximum of 5000 claimable kilometres. While this method does not necessarily require evidence, you will need to show how you worked out your business kilometres through diary records of work trips for your travel deductions.
The logbook method is one of the lengthier, more meticulous ways to claim travel deductions for work trips – however it can also make a more significant impact on your tax return.
This method requires you to keep a logbook of your work-related trips for a minimum of 12 continuous weeks to reflect your business travel throughout the year. It will then be valid for five years, or until your business usage or role changes.
In your logbook, you’ll need to include:
- The start and end date of the logbook;
- Odometer readings from the start and end date;
- Odometer readings from the start and end of each income year you use the logbook;
- Total number of kilometres the car travelled within the logbook period; and
- Accurate details for each trip showing:
- The start and finishing date of each trip;
- Odometer readings at start and end of the trip;
- Total kilometres travelled during trip; and
- Specific reason for trip – but be clear, as vague descriptions will not suffice.
If you use two or more cars to claim your travel deductions on your tax return, you need to keep a logbook for each car, covering the same period. You can typically find readymade logbooks from office supply stores, and their cost is also a tax deduction!
What Other Car-Related Claims Can I Make?
While you can’t typically claim on the purchase of your car, you may also be able to claim for costs including:
- Fuel and oil;
- Servicing and repairs;
- Lease payments;
- Vehicle loan interest payments;
- Insurance and registration.
Businesses can usually claim vehicle expenses for vehicles owned or leased by the business for business usage. This can include vehicles loaned to employees as part of their employment agreement – like some on-road sales personnel. However, the business would then need to pay Fringe Benefits Tax (FBT) on that benefit – you can read more on FBT here.
It’s best to have a chat with a tax accountant to understand what tax deductions your vehicle usage allows you to claim. Our experienced team at TaxReturn.com.au can help you organise the rest of your tax deductions at the same time!