We are regularly asked by individuals, sole traders and small businesses how much they can claim for their work vehicle(s), what expenses can be claimed, and how to provide evidence. This includes home-based businesses, which increased in 2020 due to the pandemic.

If you use your own car for work purposes, this may be a car you own, lease or hire car under a hire-purchase agreement, you can claim a deduction using either the cents per kilometre method or logbook method.

Cents per kilometre

You can claim up to 5,000 business kilometres per car per year and from 1 July 2020, the rate increased to 72 cents per kilometre regardless of the size of your engine. Written evidence is not required to be kept, however the ATO has started to ask more questions to deduce if 5,000 kilometres are actually being travelled each year. So, you do need to be able to show that you were required to use your car for work, and how you calculated your claim. In terms of depreciation deductions, if you are using the cents per kilometre basis, you can’t claim a deduction for the car under the simplified depreciation rules.

Logbook

This method uses a business-use percentage which is determined by keeping a compliant logbook for a period of at least 12 continuous weeks and it is valid for 5 years. The business-use percentage is applied to all motor vehicle expenses including fuel, insurance, registration, repairs and depreciation.

There’s a range of smart phone apps available that offer functionality to log vehicle expenses to meet ATO requirements. These apps track your travel and can even store petrol receipts. If you have a larger car that is being used for business, this may be the best option. An electronic logbook tool called myDeductions is available in the ATO app and can be downloaded here

Can I claim for travel in between work and home?

No, under either method, you can’t claim a deduction for the cost of trips between home and work even if you live a long way from your usual workplace or work outside normal business hours. However, the ATO does stipulate that in limited circumstances you can claim the cost of trips between home and work, where:

  • your home was a base of employment (that is, you were required to start your work at home and travel to a workplace to continue your work for the same employer)
  • you had shifting places of employment (that is, you regularly worked at more than one site each day before returning home)
  • you were required to carry bulky tools or equipment for work and all of the following conditions were met:
    • The tools or equipment were essential for you to perform your employment duties and you didn’t carry them merely as a matter of choice.
    • The tools or equipment were bulky – meaning that because of their size and weight they were awkward
      to transport and could only be transported conveniently by the use of a motor vehicle.
    • There was no secure storage for the items at the workplace.

You may have had different ways of working during the Covid-19 lockdown and since, so it is worth checking with your Taxpro accountant what you can claim for travel.

Home-based businesses

If you use your personal car for work purposes, you can claim the cost of trips from your home to places that you need to travel to for business. This can include a client’s office, a retail shop for buying equipment for your business, the bank, the post office, and to see your tax agent. There may be different options on how to do this depending on how your business structure is set up.

Commercial vehicles

A commercial vehicle is 100 per cent tax deductable, however this does not necessarily include a ute. A commercial vehicle is defined by being able to carry more than 9 passengers or weigh more that 1 tonne. Generally, 4-wheel drives that are standard passenger cars are classed as a ‘motor vehicle’ and one of the two methods above would be used to claim tax deductions.

For a car expenses summary factsheet click here 

We can help you determine which method will be best for you, arrange to have a chat with one of our Taxpro accountants by calling us on 08 9240 7629 or email Chloe. admin@taxproaustralia.com.au

 

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