As an employee, self-employed, or a company you have the right to claim deductions for your business-related driving from the ATO. This guide will walk you through the methods you can use based on your work status and the amount of driving.
Keep in mind you can’t claim deductions as an employee if your employer reimburses you at ATO’s rate for your business kilometres. In this case, it’s your employer that’ll claim the relevant deductions themselves.
If you receive a car allowance, instead of being reimbursed for your driving, you are entitled to claim mileage deductions, since the allowance is treated as taxable income.
You need to keep evidence of your trips no matter the method you use, in order to demonstrate the percentage of work-related driving either to your employer or to the ATO. You can keep a paper or spreadsheet logbook, where you’ll have to manually write in details for each trip. If you drive often, however, it might become tedious to do so. Alternatively, you can find many apps on the App Stores that provide automatic tracking of your driving in real-time with GPS, saving you the headache of having to remember where you’ve driven throughout the day and for what purpose. If you decide on using an app, make sure you can create an ATO-compliant logbook with it.
There are three methods for claiming deductions from the ATO - the cents per kilometre, logbook and actual expenses methods.
* As an employee, you can use the cents per km or the logbook method.
* As self-employed (sole trader or partnership), you can also use the cents per km or the logbook method, but if you use a motorcycle, a vehicle that can carry more than nine people or can carry a load of more than a tonne, you have to use the actual costs method.
* As a company that deducts business-related car expenses, you must use the actual costs method.
This method uses a rate provided by the ATO for each business kilometre you’ve driven. The rate incorporates all expenses of owning and maintaining your car and is the simplest way of deductions claim calculation available. You can use this method for up to 5000 km business kilometres per car, per year.
If you use the cents per kilometre method, you can’t claim any car expenses on top of the set rate.
Costs covered through this method:
* Registration and insurance
* Vehicle-related loan interest and lease payments
* Car servicing and repairs
* Fuel costs
If you use your vehicle for both business and personal driving, you will need to work out the percentage of business use. You can do so by keeping records of your driving throughout the year and note what’s personal and business-related driving.
The logbook method is based on the percentage of work-related driving expenses you’ve acquired throughout the year. These include fuel, servicing, registration, insurance, depreciation, repairs, lease payments and interest on vehicle loans. There is no limit to the kilometres you can claim deductions for, so if you drive more than 5000 business kilometres a year, this is the method for you.
You will have to provide a logbook for at least 12 consecutive weeks and must present receipts or invoices of all car expenses. Fuel and oil receipts are not mandatory, as these can be calculated based on the odometer readings at the start and end of your logbook. This logbook will be used as evidence for your whole year’s worth of driving.
Your logbook should contain the following information:
* The time period your logbook is for
* Odometer readings as the beginning and end of the period
* The total kilometres driven
* The percentage of total kilometres driven for business
Each recorded trip should state the start and finish time, total distance travelled and the reason for the trip.
Make out the amount you can deduct by figuring out the percentage of total kilometres that were driven for business purposes and multiply by the expenses you’ve incurred for the tax year. If 50% of your driven kilometres were business-related, and you spent $6000 on car expenses, you’ll be able to claim $3000 in deductions.
The actual costs method is similar to the logbook method, but you will have to maintain a logbook of your mileage and receipts for all expenses throughout the whole tax year and provide all receipts, including these for fuel and oil. Besides these differences, the calculation method is the same as for the logbook method.
Remember to keep your driving logs and receipts for five years as evidence, in case the ATO audits you.
Read more about deductions, reimbursement and see current and past ATO rates in this ATO mileage guide prepared by Driversnote.
This article has been prepared for informational purposes only. Consult your local tax office, accounting or legal professional for advice specific to your situation.