Motor vehicle tax deductions explained

Last updated on November 25th, 2021 at 09:46 am by Bill Tsouvalas

Did you know that you are entitled to claim certain motor vehicle tax deductions? As an employee or a business owner, you can make claims at the Australian Tax Office for motoring expenses. Don’t know for sure how to calculate the deductions? This article will show you how and will help you figure out exactly how much you can claim and what methods you can use.

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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