Well, it’s tax time and if you’re thinking ‘how can I claim my car tax back?’ you’ll want to keep reading!
Who doesn’t love tax time? It provides a solid chance of earning back the hard work (and hard cash) you’ve put in over the financial year. Sometimes you are rewarded with an impressive lump sum, and other times, you might be left a little, well, disappointed. However, one great way to ensure you are getting the most bang for your buck at tax time is to know for sure what you can and can’t claim.
For example, did you know that you can claim car expenses on your tax return? Yep, if you need your car to carry out tasks related to your job, you can add any related expenses to your tax return!
So, to help you get the most out of your next tax return, here are some Nifty tips:
What You Can Claim Back
If you use your own car in performing your work-related duties, including a car you lease or hire, you may be able to claim a deduction for car expenses. However, if the travel was partly private, you can claim only the work-related portion.
However, there is a line between what is classed as a work expense that you can claim and your general everyday expenses. For example, if you take your break to drive to Nandos and pick up lunch, this is not an expense you can claim considering, and we’re just assuming here, that getting Nandos for lunch is not a work-related necessity.
To give you an example, you can claim a deduction for work-related car expenses if you use your own car in the course of performing your job as an employee – for example, to:
- Carry bulky tools/equipment
- Attend meetings
- Deliver items or collect supplies
- Drive between two places of employment
- Travel from one workplace to an alternative workplace ie. another office
Travel to alternative workplace directly from your home or normal workplace, e.g. to visit a client
Perform itinerant work
What You Can’t Claim:
- The cost of travel between home and work because this is classed as private.
- Car expenses that have been salary sacrificed or where you have been reimbursed for these expenses.
How Can I Claim My Car Tax Back?
Car expenses are one of the most commonly claimed tax deductions at the end of a financial year. However, since 2017, you can now only calculate your car expenses in one of two ways: cents per kilometre or the logbook method.
Under the logbook method:
- Your claim is based on the business-use percentage of the expenses for the car.
- The expenses include running costs and decline in value only (not capital costs, such as the purchase price of your car, the principal on any money borrowed to buy it or any improvement/ maintenance costs).
To work out your business-use percentage, you need to keep a logbook and record the odometer readings for the logbook period (a minimum of 12 continuous weeks).
You can claim fuel and oil costs based on either your receipts or you can estimate the expenses based on the odometer records that show readings from the start and the end of the period you had the car during the year. You need written evidence for all other expenses for the car.
Under the cents per kilometre method:
- A single rate is used. Your claim is based on 68 cents per kilometre
- You can claim a maximum of 5,000 business kilometres per car.
- You may need to provide written evidence to show how you worked out your business kilometres (for example, by producing diary records of work-related trips).
- Where you and another joint owner use the car for separate income-producing purposes, you can each claim up to a maximum of 5,000 business kilometres.
Is There A Best Way To Claim My Car Tax Back?
When it comes to calculating your car deductions, it really does depend on your line of work and how much you are needing to use your own personal car to complete work duties. Both the logbook method and the cents per kilometre method have their benefits. At the end of the day, it is up to you to decide which method suits best. Perhaps it’s something you could discuss with your employer or your accountant. However, that does not mean we can’t give you some handy tips.
Benefits Of The Logbook Method
The purpose of the logbook and accompanying odometer records is to determine the business-use percentage of the vehicle. As a general rule, the higher the business-use percentage, the greater the deductions may be for work-related car expense under income tax. However, under Fringe Benefits Tax (FBT), the higher the business-use percentage, the lesser the FBT payable for car benefits.
By the way, Fringe Benefits Tax is a tax that is payable by employers for benefits paid to an employee in place of salary or wages. Essentially, your employer may be providing a car fringe benefit if they make available a car they own or lease to you for your private use.
Anyway, moving on. The logbook method is a great way of tracking your vehicle expenses and having written proof on hand to provide the Australian Tax Office with if it ever becomes necessary. Plus, you may even be able to claim more expenses and therefore receive a larger return. However, this is something best discussed with your accountant.
Now, we know that the thought of having to fill in your logbook every day may fuel your scepticism, however, the hardest part is getting started. Plus, you only have to maintain your logbook for 12 consecutive weeks once every financial year (as long is it is typical for your normal usage).
You’ll need to record:
- The date, start and finish times for each journey
- Start and finish odometer readings
- Total kilometres travelled on that journey
- The reason for the journey
You will also need to record:
- The start and finish dates for the logbook period
- Start and finish odometer readings for that period
- The total number of kilometres travelled during that period
- And the business-use percentage during that period (how much use was work-related)
Benefits Of The Cents Per Kilometre Method
This method essentially means that you can claim 68 cents per business kilometre you travel, up to 5,000 business kilometres a year. Therefore, if you claim 2,500 kilometres of business travel in a year, you could receive up to $1,700 in your tax return.
Business kilometres or travel simply refers to the kilometres you travel in producing assessable income or between workplaces. This method doesn’t require you to do any specific record-keeping. So, it may be favourable for those who aren’t keen on the bookkeeping involved with the logbook method. However, keep in mind that your claim has to be ‘reasonable’, and you need to be able to show some logical basis for the kilometres figure derived.
Many people favour this method as it does not require you to keep any type of formal record of your business travel. However, the Australian Tax Office can request to audit your claims to confirm how you calculate your expenses and how they are all work-related.
Therefore, it may be a good idea to keep some form of record anyway. This just ensures you have all your bases covered when you go to submit your claim. You might want to keep records, for example, diary entries, showing how you calculated the kilometres you travelled for business. Again, if you are unsure of anything, or you’re looking for tax advice, please consult a qualified accountant.
What Can I Include When I Claim My Car Tax Back?
Naturally, there are limitations to what type of car expenses you can claim. Sadly, the auxiliary cord you purchased to help you listen to podcasts on your commute, won’t count. However, the petrol you used to get between your workplace and your client’s is absolutely something you can claim!
The car expenses you can claim include:
- Interest on loan costs
- Other running costs that are work-related.
What Can’t I Include When I Claim My Car Tax Back?
Well, we know that you can’t claim the travel between your home and your workplace. This is considered “private” use and unfortunately, there are no exceptions, even if:
- You’re completing small tasks required by your employer on the way to work. For example, you are picking up the mail or some office supplies for your employer
- You’re driving back to work for things such as security calls or even parent-teacher interviews.
- You’re working overtime and there’s no public transport for you to get home.
I’m Still Not Sure How To Claim My Car Tax Back
Don’t stress! Working with taxes is confusing at the best of times, especially because the rules are always changing. As we said, the best way ensure you are getting the most bang for your buck, while still doing the right thing, is to find yourself a trusty accountant who can offer advice where it’s necessary.
However, to assist you with your own personal calculations, check out this tax return calculator. It will help you work out the tax you owe on your taxable income and help you get a better idea of what your tax return might look like! Another great way to keep track of your expense and income records is with the ATO’s myDeductions app. As an employee, this app will help you keep records of your work and general expenses.
How Do I Claim My Car Tax Back?
Figuring out your deductions can be hard enough, let alone having to submit them. However, we have some Nifty tips that may help!
If you are lodging your tax return yourself, it’s best to lodge it through the ATO’s website. It is the quickest, easiest and safest way to lodge your tax return. Otherwise, chat with your account about the most suitable process for your individual situation! They may even submit your claim for you! If you’ve never worked with an accountant before, you might not be sure of how to find the right one. Consequently, check out the ATO’s page on finding a register tax agent!
What Are Some Other Benefits When I Claim My Car Tax Back?
When it comes to submitting your tax return, you ideally want to try and get to biggest return possible. After all, you’ve worked hard this financial year and you deserve the reward! So, some other options that you can take advantage of include:
- A $20,000 immediate tax deduction for small business owners who make business-related purchases, including new or used vehicles.
- Chattel mortgages – which allow you to remain the legal owner of a vehicle while providing it as security to your lender. With this option, you are able to claim the GST you paid when you bought your vehicle as an Input Tax Credit.
- Novated Lease – which is an agreement between you, your employer and a third-party lender. Whereby you take out a loan for a vehicle you wish to purchase and your employer makes the repayments by deducting the operating costs from your pre-tax income.
These are just a couple of other options when it comes to getting the most for the travel hours you put into your job!
I’m Ready To Claim My Car Tax Back!
We hope that this information has been helpful for you. So, now when you go to lodge your tax return you’ll get the most out of the financial year! As the hard-worker that we’re sure you are, you deserve that nice little cash-flow boost.
You may be entitled to more than you realise! Find out how you can find unclaimed money today!
If you have any questions on the information we have provided here, or you have something you would like to add, feel free to get in touch with the Nifty team.
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