What car-related costs can I claim on my taxes?
Saving money at tax time is something that everyone wants to do. If you have work-related car expenses, then you might be able to deduct work-related car expenses under certain circumstances. Let’s explore when and how you can deduct your vehicle expenses at tax time.
Here are a few examples of times when you might be able to deduct your car expense when using it for business.
The Australian government allows two different methods for claiming the car allowance tax deduction. When claiming car expenses, you can use either method. Here is a break down of how they work.
Using this method, you can deduct a set rate for each kilometre that you travel for business-related activities. If you use this method, you must demonstrate that you used the kilometres claimed for work. A simple logbook that includes the miles travelled is sufficient. Let’s take a look at an example.
Jim is a manager for the construction industry. He uses his personal car to deliver and drop off supplies to a remote worksite that is 7km away. The round trip is 14 km to and from the home office. He does this once a week, every week of the year except for two weeks of vacation. The current allowable rate is $0.68/kilometre.
Pros
Cons
This method requires more record keeping of motor vehicle expenses. Still, if you use your personal vehicle for work frequently, it can add up to a more significant deduction. Let’s see an example.
Now, let’s say Jim uses his own vehicle for 1,000 km during the 12 week period when he tracked vehicle mileage in his logbook. Let’s also say that Jim kept records of fuel, repairs, service, insurance, and took depreciation on his new vehicle. The current deduction rate using the logbook method is 85%.
Pros
Cons
Both vehicle expense deduction methods have different rules that apply to when you can and cannot take the deduction. Here are a few examples that might apply to your circumstances.
You can deduct expenses from a car that you own, lease, or is under a lease-to-own agreement. This can be claimed using either the logbook or cents per km method. In some cases, you might be able to claim the car tax deduction for vehicles, such as motorcycles, passenger vans, or trucks fitted to haul equipment.
Sometimes, deciding how the rules for the car tax deduction apply to you can be tricky. Hiring a tax accountant can help you take the maximum allowable deduction for your circumstances and help you to avoid any penalties for claiming something that is not allowed. Here are a few tips for hiring a tax accountant.
To claim your tax deduction and get the proper credit for your circumstances, you need to do a few things to help your tax professional:
Hiring a tax professional is an important decision. You must choose carefully because utilising the wrong one can land you in trouble. Here are some of the requirements needed to become a tax accountant.
Tax accountants use different methods of charging for services. Some charge a flat fee, while others work on a percentage basis. Here are a few tips for saving money when hiring a tax professional.
Can you claim fuel on tax?
Claiming fuel on tax is only allowed if you choose the logbook tax method. A matching receipt must accompany a fuel claim, and you must keep a travel logbook for tax purposes. You can only claim a portion of your fuel expense that was used for work purposes. You cannot claim this deduction if you use the cents per km tax deduction method.
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