We all hate the stress right before tax time over work related car expenses. Get on top of it early at the start of the financial year so you can truly enjoy the most wonderful time of the year: tax time. Hellooooo cash refunds!
Yep, this time you can diligently whip out those receipts and claim all the work-related expenses you’ve incurred over the last 12 months – because you’ll be on top of it from the get go, alongside being financially fit in the new FY.
Think work gear, gadgets, any work-related accom and, if you use a personal car for your job, your work-related car costs.
Huh? I can claim work related car expenses as deductions?
Yep! If you use your car for work purposes. If you’re a sales rep and you need to visit businesses, or you travel to worksites during your workday, then you can claim that work-related portion as a tax deduction. Woohoo!
Great. How do I do it?!
There are two methods to work it out: the cents-per-kilometre method or the logbook method.
The method you choose will largely depend on the amount you use your car. You can also use the ATO’s work-related car expenses calculator to help you figure out how much you can claim.
Let’s break it down.
The Cents-Per-Kilometre Method
Under this method, you can claim a max of 5,000 (work-related) kilometres per car.
The amount you can claim per kilometre changes every year, so make sure you check the ATO website each financial year for the right amount. For the 2020-21 financial year, you can claim 72 cents per kilometre.
All you need to do is:
- Calculate the number of business kilometres x rate per kilometre for that financial year (ie 5000km x 72c), and
- Keep evidence for how you worked out your business k’s (in case the ATO taps your shoulder).
The Logbook Method
Under this method, your claim is based on the work-related portion of your actual expenses for the car.
These are expenses like fuel or oil costs, as well as the kilometres you drove.
But there’s a catch: you need to keep a logbook of at least 12 weeks showing all the business journeys you made over that period. You’ll need to keep all your receipts, too.
What can’t I claim?
Well, first thing’s first. If you use a work car, you can’t claim anything. The deductions can only be if you use a personal car for work purposes.
On top of that, you can’t claim a tax deduction for:
- Your commute to work and back
- Private travel
- Expenses you pay for under a salary sacrifice or novated lease agreement
- Expenses your employer paid for.
So now, all those long drives to your clients’ offices in whoop-whoop are finally paying off!
General advice warning:
This information is general in nature and does not take into account your personal financial situation. It is for educational purposes only, and does not constitute formal financial advice. You should always seek personal financial advice that is tailored to your specific needs.
Co-founder of Flux Finance, a podcast and media platform that helps guide over 200,000 Aussies with their financial literacy, Justin provides a unique perspective on millennial finance.