This guide looks to explain the deductibility of motor vehicle expenses for those who use a motor vehicle for work purposes. These deductions are only for motor vehicles with a carrying capacity of less than one tonne.
Motor vehicles that are excluded from this are; utility trucks with a capacity of one tonne or more, utility trucks that have a carrying capacity of nine or more passengers and motorcycles.
Ownership
You can claim your work related expenses for a motor vehicle you own, lease or that is under hire purchase. You cannot claim any expenses if the vehicle is owned or leased by someone else such as your employer or another member of your family.
METHODS OF CLAIMING:
Cents per Kilometre
This is the simplest method available. You can claim up to 5,000 business kilometres per vehicle even if you have travelled more than 5,000 business kilometres. You do not need to substantiate expenses but you need to demonstrate how you calculated a reasonable estimate of kilometres.
The deduction is determined on the number of kilometres travelled (maximum 5,000) by a specified cent rate that is based on your car’s engine capacity. The cent rate may change year by year.
Log book Method
This method requires you to calculate your actual business kilometres use of the vehicle as a percentage of the total kilometres travelled. A claim is based on the business percentage calculated for expenses paid for fuel, oil, registration, insurance, repairs, servicing, interest and depreciation or lease payments, and any other running costs of your vehicle.
Documentary evidence of expenses (receipts etc) must be kept for five years after you have made the claim.
A valid logbook must be completed recording your business trips showing date the journey started and ended, odometer readings for the start and end of the journey, how many kilometres the vehicle travelled and the reason for the journey.
You must keep a logbook for at least 12 continuous weeks and if you have two vehicles both logbooks must be kept concurrently. The logbook is valid for five years and must be kept for five years after you made thenlast claim from the logbook.
If your business travelling pattern changes, or you change employers, a new log book must be completed.
12% of Original Value
You can use this method if you travelled more than 5,000 kilometres during the income tax year. You are not required to keep a logbook however you do need to demonstrate how you calculated your business kilometres.
Evidence of the purchase price (purchase invoice) must be kept for five years after your last tax claim. You can claim 12% of the cost price, or 12% of the vehicle’s market value at the time of leasing.
If a vehicle is owned part of the year, you need to work out whether you have travelled 5,000 kilometres prorated (based on the number of days the vehicle was owned in the income tax year).
If you travelled less than 5,000 kilometres you cannot use 12% original cost method. You can only use the ‘cents per kilometre’ or ‘logbook’ method.
One-third of Actual Cost
You need to travel more than 5,000 kilometres if you wish to claim one-third of your expenses for each vehicle. You will need to keep documentary evidence of all your vehicle expenses for fuel, oil, registration, insurance, repairs, servicing, interest, or lease payments and any other costs of running your vehicle.
You are not required to maintain a logbook, however you will need to show the odometer readings of the vehicle at the start and end of the income tax year.
Submitted by: Eric Farrance – Rubiix Senior Manager