Which car expenses can be claimed on tax?

3 Dec

Navigating Car Claims: Your Tax Deduction Guide

Every year, as tax season approaches, a flurry of questions arise. Among the most common is the query about car expenses. Can they be claimed? And if so, to what extent? For many Australians, their vehicle isn’t just a mode of transport—it’s an essential tool for their business or job. Whether you’re a salesperson zipping across the city for client meetings or a tradie hauling tools to different job sites, understanding car-related tax deductions can make a significant difference to your tax return. Let’s navigate the maze of car expenses and tax deductions together.

Understanding Vehicle Tax Deductions

When it comes to tax deductions, vehicles often raise many questions. From fuel costs to servicing, what exactly can you claim? Here, we’ll demystify the essentials, providing clarity on what’s deductible and what’s not.

The Basics of Vehicle Deductions: At the core, any expense you incur to earn your income could potentially be claimed. However, the key is ensuring these expenses are directly related to your income-producing activities.
What Qualifies as a Deductible Expense: Costs like fuel, servicing, and even interest on a car loan can be claimed. However, there are conditions. For instance, if you use your car for both personal and work purposes, you’ll need to calculate the work-related portion of each expense.

Eligibility Criteria: Can You Claim?

Before diving into the specifics, it’s crucial to understand who can claim car expenses and under what circumstances. The Australian Taxation Office has set clear guidelines, and we’re here to break them down for you.

Personal vs Business Use: If you use your car purely for personal reasons, you can’t claim a deduction. However, if there’s a mix of personal and business use, you can claim the business portion.
Travel Between Work and Home: Generally, you can’t claim the cost of driving your car between work and home just because you carry bulky tools or equipment.
Vehicle Type and Method: Depending on the type of vehicle and its intended use, different methods for calculating deductions might apply.

Claiming Car Insurance and Rego

From insurance premiums to registration fees, discover how these regular car expenses can impact your tax return.

Insurance: If you use your car for work or business, you can claim the portion of your insurance premium that relates to that use.
Registration: Like insurance, the business portion of your annual registration cost is deductible.

Car Depreciation: Maximising Your Return

Your car’s value decreases over time. But there’s a silver lining. This depreciation can be turned into a potential tax benefit.

Immediate Write-Off: For cars costing less than the instant asset write-off threshold, you might be able to claim an immediate deduction.
Depreciation Over Time: For more expensive cars, you can claim a portion of its value each year over a set period.

Work-Related Travel: What’s Deductible?

Driving to a client meeting or a work site? It’s essential to differentiate between deductible and non-deductible travels.

Meetings, Conferences and Training: Travel for these work-related activities can be claimed.
Travel Between Two Separate Workplaces: If you have two jobs and travel directly from one job to another, you can claim the travel costs.

Logbooks and Tracking: Keeping Records

Accurate record-keeping is the cornerstone of valid car claims. From logbooks to digital apps, ensuring you track every work-related kilometre is crucial.

Why Keep a Logbook? A logbook can provide a clear record of your car’s business use over a 12-week period, which can then be used to determine your claim for the entire year.
Digital Solutions: Modern problems require modern solutions. Digital apps can now track your trips, making record-keeping a breeze.

Dedicated Accountants: Their Role

Beyond just numbers, Accountants play a pivotal role in guiding individuals through the maze of car-related tax deductions. Their comprehensive understanding of the tax system can help maximise returns and ensure compliance.

Avoiding Common Pitfalls in Car Claims

Claiming car expenses can be tricky. But with the right guidance, you can steer clear of common mistakes.

Not Keeping Records: One of the biggest mistakes is not keeping accurate records. Ensure you have all receipts and documents related to your car expenses.
Claiming Non-Deductible Trips: Personal trips, or trips between home and work, are generally not deductible. Ensure you’re only claiming work-related car use.