Motor Vehicle Expenses – work related deductions

  • July 5, 2012
  • Tax

There are four methods you can use to claim your work-related car expenses:

  • Cents per kilometre method
  • 12% Original Value method
  • 1/3 of actual expenses method
  • Logbook Method

Each has different record keeping requirements. If you qualify to use more than one method, then we can calculate for you, the deduction under each method to decide which gives you the best result.

What can expenses can I claim:

  • Fuel
  • Repairs & Maintenance
  • Registration
  • Insurance
  • Depreciation

1. Cents per kilometre method- CLAIM TYPE ‘S’

This method uses a set rate of each kilometre travelled for work related activities. The rate varies depending on the size of your car’s engine.

To calculate your deductions using this method, you need to show how you calculated the amount of kilometres you travelled for work, BUT you do not need written evidence.

Example: If you travelled 3800 kilometres for work during the 2011-2012 year, and your car has an engine size of 1.6L, your deduction for the year is $3800 X 0.63 = $2,394.

2. 12% Original Value- CLAIM TYPE ‘T’

If your car has travelled more than 5000 kilometres for work during the year, you can use the 12% original value method. This means that your deduction is 12% of the original cost of the car. Note that if you drive a luxury car there is a limit to the deduction that can be claimed.

You do not need written evidence to claim under this method BUT you do need to be able to show how you worked out how many kilometres you travelled.

3. 1/3 Actual Expenses- CLAIM TYPE ‘O’

To use this method you need to have travelled more than 5000 kilometres for work during the year. Under this method, you can add up all of your expenses relating to the car, including registration, insurance, lease payments, repairs etc and divide the total by 3.

Note: you cannot include the purchase price of the car or any money borrowed to buy the car as an expense nor can you include the cost of making improvements to your car.

To claim deductions under this method, you need to have written evidence/receipts for fuel and oil costs or alternatively you can estimate the costs based on your odometer readings.

4. Log Book Method- CLAIM TYPE ‘B’

To claim under this method you must have kept a logbook during the financial year ended 30 June 2012. You cannot claim using this method if you have only started using a logbook since 1 July 2012 nor can use estimate your business kilometres using this method at the end of the year. You need to be able to show that you have kept the log book for a continuous period throughout the year and have documented each trip in the logbook.

Under this method you need to keep strict records of your kilometres, regularly filling out your logbook with dates and kilometres travelled. At the end of the year, your business kilometres are separated from your non work related travel and this percentage is used to claim a percentage of your total expenses.

Example If you had the following expenses throughout the year:

  • Fuel $5,600
  • Insurance $3,000
  • Registration $400
  • Repairs $500
  • Total Expenses $9,500

– Total Kilometres Travelled – as per logbook 54,875

– Number of these kilometres which were work related 31,200

– % of Business kilometres 31,200 / 54,875 = 0.56856 (56.86%)

– Therefore you can claim 56.86% of total expenses (0.56856 x 9,500= $5,401.37)