Car Allowance Tax Deduction
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 or equipment
- attend conferences or meetings
- deliver items or collect supplies
- travel between two separate places of employment (for example, when you have a second job)
- travel from your normal workplace to an alternative workplace and back to your normal workplace or directly home
- travel from your home to an alternative workplace and then to your normal workplace or directly home (for example, if you travel to a client's premises).
There are four methods for claiming work-related car expenses:
If you travelled below 5,000 kilometers:
Method 1 - Cents per kilometer
- Your claim is based on a set rate for each business kilometre.
- You can claim a maximum of 5,000 business kilometres per car, per year.
- You do not need written evidence, but you need to be able to show how you worked out your business kilometres. Diary records will suffice.
Method 2 - Logbook
- Your claim is based on the business use percentage of the expenses for the car.
- Expenses include running costs and decline in value but not capital cost
- To work out your business use percentage, you need a logbook and the odometer readings for the logbook period.
- You can claim fuel and oil costs based on either your actual receipts or you can estimate the expenses based on 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.
- Your business use percentage is the percentage of kilometres you travelled in the car for work during the year divided by the total kilometres travelled by the car during the year.
- Your logbook is valid for five years. If this is the first year you are using this method, you must have kept a logbook during 2013-14. It must cover at least 12 continuous weeks.
- Your logbook must show:
- when the logbook period starts and ends, and the odometer readings at these times
- the total number of kilometres the car travelled during the logbook period
- the number of kilometres travelled for work during the logbook period based on the journeys recorded for the period
- the business use percentage for the period.
- Entries in the logbook for each business trip must be made at the end of the journey (or as soon as possible afterwards) and show the:
- date the journey began and ended
- odometer readings at the start and end of the journey
- kilometres travelled on the journey
- reason for the journey.
- Your records must also show the make, model, engine capacity and registration number of the car.
If you travelled more than 5,000 kilometers:
Method 3 - 12% of original value
- Your car expenses claim is based on 12% of the original value of your car. Luxury car limits apply.
- You do not need written evidence, but you need to keep a record of how you worked out your kilometres.
Method 4 – One-third of actual car expenses
- You claim one-third of all your car expenses, including private costs (but excluding capital costs, such as the purchase price, the principal on any money borrowed to buy your car and the cost of any improvements).
- For fuel and oil costs, you can keep receipts to work out the amounts or you can estimate them based on 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 the other expenses for the car as well as records that show the car's engine capacity, make, model and registration number.
- You may need to show how you worked out your business kilometres and any estimates you made.
Important Note: You must own the car to claim under any of these methods and the record keeping requirement is detailed for each method. If your car is provided by your employer, or as part of your salary package you cannot claim any of the car costs, whatsoever.
What can't you claim?
You cannot claim the cost of normal trips between home and work because that travel is private even if:
- You do minor tasks on the way to work, such as picking up the mail
- You travel back to work for a security call out or parent teacher interviews
- You work overtime and no public transport is available to use to get you home