Changes to Motor Vehicle Expenses

transportation and ownership concept - man pumping gasoline fuel in car at gas stationDo you currently claim motor vehicle expenses in your tax return? This financial year is the first year with the new calculation system in place, which means you may no longer be able to use the same calculation method that you used previously.

Prior to this year, there were four options for calculating your vehicle expenses; however these will be reduced to just two acceptable methods moving forward:

Cents per kilometre: previously the number of cents per kilometre varied depending on the size of the vehicle’s engine. As of this year, the applicable amount will be sixty-six cents per kilometre, although the Commissioner of Taxation may vary this amount in the future. This method allows a maximum claim of 5,000 kilometres (which will equate to $3,300 at sixty-six cents a kilometre).

Logbook: the logbook method is one of the two methods still recognised by the ATO (along with cents per kilometre). Like the one third of expenses method, detailed records are required for all expenses except fuel and oil and must cover a period of at least twelve continuous weeks. You also need to determine the percentage of business use if the vehicle is also used for personal use. Once calculated, this method is valid for five years.

Twelve per cent of the original value: this method allows you to claim twelve per cent of the purchase price of the car (or its market value at the time of leasing if it is a leased vehicle). There was a maximum limit set for calculating expenses using this method; however, since the end of the 2014/2015 financial year, the twelve per cent of the original value is no longer accepted for use.

NOTE: if you used either the cents per kilometre method or twelve per cent of original value method, you are not able to claim vehicle depreciation as a separate deduction in your tax return.

One third of actual expenses: like the 12 per cent of original value method, this method is no longer in use from this year onward. This method did not include capital expenses such as the initial purchase price, and required fairly detailed records of all expenses (excluding fuel and oil, which can be costed using records or from odometer records).

If you have used either the twelve per cent method or one third of expenses method, you will need to transfer over to one of the two accepted methods for this year and beyond to ensure that your motor vehicle expenses are recognised. If you plan to use the logbook method, you will need to allow sufficient time before the end of the financial year to ensure twelve continuous weeks of records can be completed, so don’t leave your decision to the last minute!

By Jennifer Lowe

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