It’s about this time Australian car owners start trying to work out how they can improve their tax return. Through deduction claims, expenses, log books and all other claims to get more of your tax back each year.
Deductions are different for every person and relate to your specific situation, but we’ve put together a list of possible car related deductions to help you get a better return.
Work Related Car Expenses
As an employee there are instances when you can claim your car expenses. Generally, you can’t claim your travel between work and home as this is private, but you can claim on trips you make for work reasons, such as travelling between job sites, delivering or picking up supplies, and attending conferences or meetings. If you have more than one places of employment you can also claim the travel between the two workplaces.
Cents per Kilometre
You can make these deductions in two ways; the first is to use the cents per kilometre method. This means you will need to record how many work related kilometres you travel in the financial year, up to 5,000km. You don’t need to show evidence but you do need to be able to show how you worked it out (e.g. dairy records).
If you feel your expenses will exceed what the above method allows you to claim, you can keep a logbook. This must be kept for a minimum of 12 weeks and include all expenses, the business use percentage, odometer readings, purchase price, money borrowed and repayments, as well as fuel and oil costs. Talk to an accountant if you have trouble setting this out.
Car Leasing and Tax Deductions
When leasing a vehicle privately you can still claim work related travel expenses as mentioned above.
If you are leasing the vehicle as a business expense it’s possible to claim on some or even all of the GST from the rental fees. Depending on whether the amount financed is above or below the depreciation limit will determine whether you can claim the lease as a tax deduction, or the interest charges and depreciation of the vehicle.
Buying a Business Car
At present small businesses can claim deductions for individual assets valued less than $20,000. This means if you purchase a vehicle for less than $20,000 before 30 June 2017 and register it as a business purchase, you can claim the full amount. Talk to us about car finance if you’d like to make the most of this before the deduction amount reduces back to $1,000.
Keep in mind, there are many things you have to consider, such as how often the car is used for business purposes, who drives it, where it is garaged etc.
Whether you’re just about to do your 2016 Tax Return, or you want to prepare recording deductions for next year, make sure you look into your own personal eligibility before making bogus claims. The ATO do check up on many of these things and there are some hefty penalties for lying on your tax claim.
If you’re ever in doubt it’s best to talk to an accountant.