tax deductions for vehicles
Business Basics, Start Up / New to Business, Tax & Accounting

Motor Vehicle Deductions – The Basics

The methods for claiming your car expenses (motor vehicle deductions) have changed in the last 12 months in an effort to ‘simplify’ the way deductions are made.

The options changed from 4 methods down to 2. Those 2 being:

Cents per Kilometre method

You can claim up to 5000kms per year at a set rate of 66c per km. The need for paperwork to back this claim up is minimal. If you were audited you need to be able to justify why you claimed what you did. In general, this would be that you make specific work trips on a weekly, monthly basis that you have worked out the kms for and therefore worked out an approximate claim.

Logbook Method

This method requires you to keep a logbook for ALL travel for 12 consecutive weeks. From this logbook, you then calculate your ‘work’ or ‘business’ percentage and apply that against all your motor vehicle costs. The logbook is valid for 5 years as long as your situation doesn’t change materially eg. You move suburbs, work location etc. We suggest you pick 12 weeks you are working and not going on holidays or doing excessive personal travel.

What can you claim against the logbook method?

  • Fuel
  • Registration
  • Insurance
  • Repairs & Maintenance – servicing, tyres, wheel alignments/rotations etc
  • Depreciation – either at 25% diminishing value or if you qualify using the Small Business pools (15% first year and 30% in subsequent years)
  • Interest on any loan taken out for the vehicle
  • Leasing costs if the vehicle is leased

What is ‘business/work’ travel

It is important that when you are completing your logbook you are correctly classifying business/work travel. In general travel from home to work is personal travel. An exception to this would be if you are required to carrying bulky items or if you had to go via a client premises, other errands on the way. Remember these need to be legitimate trips, don’t attempt to manipulate your travel to ‘make’ it deductible. Travel from work to a work event, client premises, study/training event will be deductible.

For more details explanations and examples head to the ATO website.

Exceptions to logbook requirements

Exceptions are made for commercial vehicles which the ATO defines as “the vehicle is a panel van, utility or other commercial vehicle (that is, one not designed principally to carry passengers)”.  In general, this includes utes, panel vans, vans and dual cab utes over 1 tonne in capacity. The ATO have an easy to understand table.

There are several apps out now that work on most phones to assist with your logbook needs. One of these include www.logbookme.com.au where you hire the device for 3 months and it uses GPS to track your trips.

If you aren’t sure which method will work out best for you, complete a logbook and then you can complete the calculations on both methods at year end to claim the best deduction.

We suggest you consult your tax advisor or accountant regarding your personal situation as there are always variables between each person’s circumstances

Recent Posts

Why Your Small Business Should Use Swell: A Cashflow Forecasting Tool

In the world of small business, keeping up with the latest data trends and maintaining a healthy cash flow can be quite demanding. This is where Lemonade Beach’s Cashflow Forecasting program, “Swell” steps in – a real time financial tracking and management tool that serves as your financial consultant and advisor.

Three Swell Levels to Transform Your Business: Snapper, Bells, and Mavericks

In this blog post, we delve into the three levels of our Swell Cashflow Forecasting tool: Snapper, Bells, and Mavericks. Each one is designed to address the specific needs of businesses at different phases of their journey.

Tax Time Occupation Guides

With tax time upon us, the ATO has pulled together some handy occupation guides to help you to better understand what you can and can’t claim on your 2022 income tax return.

You can download each of the guides in our latest blog article, or visit the ATO website for more information.

Tax Saving Strategies for Small Business Owners

Owning a small business presents various challenges, and managing taxes effectively is one of them. Although navigating the complex tax system may seem overwhelming, implementing effective strategies can lower your tax responsibilities and boost your profits. As tax specialists, we’ve pulled together some practical tax-saving strategies designed for small business owners.