Claiming Motor Vehicle Expenses

The ATO now only allows two methods for calculating motor vehicle expenses being the Cents per kilometre method and the Logbook method.

1. The Cents per kilometre method enables you to claim up to 5,000 business kilometres per car at a flat rate of 66 cents per kilometre for 2016/17 and 2017/18 years. You can claim a maximum of 5,000 business kilometres per vehicle. You do not need written evidence to show how many kilometres you have travelled, but the ATO may ask you to show how you worked out your business kilometres. You cannot make a separate claim for depreciation of the car’s value.
2. The Logbook method allows you to use a business-use percentage which is determined by keeping a compliant logbook for a period of at least 12 continuous weeks. The business-use percentage is applied to all motor vehicle expenses including fuel, insurance, registration, repairs and depreciation e.g. if your business percentage is 60% then you will receive a tax deduction for 60% of the motor vehicle expenses incurred. When using the logbook method all expenses must be verified with written evidence.

If this is the first year you have used the logbook method you must keep a logbook during the income tax year for at least 12 continuous weeks. That 12 week period needs to be representative of your travel throughout the year.

If you started to use your car for business purposes less than 12 weeks before the end of the income year, you can continue to keep a logbook into the next year so it covers the required 12 weeks.

Each logbook you keep is valid for five years, but you may start a new logbook at any time.

If you establish your business-use percentage using a logbook from an earlier year, you must keep that logbook and maintain odometer readings in the following years.

If you want to use the logbook method for two or more cars, the logbook for each car must cover the same period. The 12-week period you choose should be representative of the business use of all cars.

The GST treatment on motor vehicle expenses will differ based on the method used. The cents per kilometre method allows you to claim up to 33.3% of the GST paid if you travel more than 5,000 business kilometres or a lower set percentage if you travel less than 5,000 business kilometres. The logbook method allows you to claim GST based on your business-use percentage.

Depreciation that can be claimed on the purchase of a motor vehicle is capped at $57,581 for the 2016/17 financial year. The maximum GST that can be claimed on a motor vehicle above this limit is 1/11th of $57,581 being $5,234. If you purchase a car for $88,000 which includes GST of $8,000 the maximum GST you can claim is $5,234. The GST will need to be reduced by any private use based on the method used to calculate motor vehicle expenses.

Commercial Vehicles.

The only vehicle that will automatically be 100 per cent tax deductible is a commercial vehicle. Confusion often surrounds what is a commercial vehicle and many people automatically assume that utes fall in to this category.  A Commercial Vehicle is defined as one designed to carry more than nine passengers or more than 1 tonne in weight. The only time a ute will be classed as 100 per cent tax deductible if the owner can show that their private use is minor and infrequent.

Four wheel drives that are standard passenger cars do not receive any special tax treatment and require log books to be kept to determine the percentage of business kilometres.