Motor vehicle tax deductions explained

Last updated on November 25th, 2021
  Written by 
Bill Tsouvalas
Bill Tsouvalas is the managing director and a key company spokesperson at Savvy. As a personal finance expert, he often shares his insights on a range of topics, being featured on leading news outlets including News Corp publications such as the Daily Telegraph and Herald Sun, Fairfax Media publications such as the Australian Financial Review, the Seven Network and more. Bill has over 15 years of experience working in the finance industry and founded Savvy in 2010 with a vision to provide affordable and accessible finance options to all Australians. He has built Savvy from a small asset finance brokerage into a financial comparison website which now attracts close to 2 million Aussies per year and was included in the BRW’s Fast 100 in 2015 as one of the fastest-growing companies in the country. He’s passionate about helping Australians make financially savvy decisions and reviews content across the brand to ensure its accuracy. You can follow Bill on LinkedIn.
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Can you deduct motoring expenses?

Not all motoring expenses can be deducted, but you can figure out which of them can be by thinking about the aim of the trips you’ve taken and would like to deduct the cost of. For example, if you drive to work and back, that’s an expense you cannot claim. If, however, you are gone on a business trip, that is tax deductible. If your activities fall under the umbrella of those that are eligible, you can claim them on vehicles that you are leasing, that are hired or that you own. Here are some scenarios in which trips are eligible for tax deduction:

  • Going to several jobs or places of employment
  • Going to conferences, meetings or client visits
  • Transporting large or otherwise cumbersome supplies, equipment or tools
  • Doing collection or delivery work

How can you claim these expenses?

There was a variety of methods in which you could calculate the tax deduction, including declaring one-third of your total costs and calculating 12% of the original price of the car, but they were made obsolete because no one was using them. Now, there are two primary methods:

Keeping a travel logbook

For this, you have to keep a travel logbook for a period of three months (12 weeks, to be exact), in which you must keep track of both business and non-business mileage recorded. This way, you can figure out what percentage is actual business-related voyage and you can calculate that number out of your yearly operating costs. Keep in mind that you also need odometer readings and receipts, in order to demonstrate what you are claiming.

Calculate cents per kilometre

All you have to do is take your total number of kilometres that you’ve made in the interest of business in a year and multiply by a certain number of cents per kilometre. As of July 1, 2015, this number is a 66 cents flat rate, no matter the size of the engine. Previously, the car allowance depended on the size of the engine and it varied between 63 cents and 75 cents.

What about expenses you can’t claim?

As mentioned previously, you can’t claim motoring expenses from driving to work and back. Other conditions include the fact that your car cannot be owned by your employer or paid as part of your salary. As for the “carrying bulky items” provision, that is only effective if your place of work does not include storage space where you can leave them. Storing these items in your car is not a solution and will not grant you an allowance.

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