Claiming Motor Vehicle Expenses

  • August 6, 2009
  • Tax

Below is a summary of the different methods for claiming motor vehicle expenses in your individual tax return.

Work-related car expenses are expenses you incur in the course of performing your job as an employee and you claim this deduction at item D1. You cannot claim the cost of normal trips between home and work as the expense is private.

To be able to claim the work related car expenses, the car must be owned or leased by you or hired under a hire purchase agreement.

There are four methods to be chosen to work out your car expenses. If you qualify to use more than one method, you can use whichever gives you the largest deduction or is most convenient. These methods are

1.Cents per kilometer

2. 12% of original value

3. One-third of actual expenses

4. Logbook

Method 1 – Cents per kilometer

  • Your claim is based on a set rate for each business kilometres.
  • You are able to claim a maximum of 5,000 business kilometres, even though if you have travelled more than 5,000 business kilometres.
  • You do not need written evidence.

Method 2 – 12% of original value

  • Your claim is based on 12 per cent of the original value of the car when you purchase it.
    • If you leased the car, you can claim 12 % per cent of its market value at the time that you first leased it.
    • The value is subject to depreciation cost limits. [2009 – $57,180]
    • Your car must have (or would have) travelled more than 5,000 business kilometres.
    • You do not need written evidence.

Method 3 – One third of actual expenses

  • Your claim is based on one-third of each car expense.
  • Your car must have (or would have) travelled more than 5,000 business kilometres.
  • You need written evidence or odometer records for fuel and oil costs.
  • You need written evidences for all other car expenses.

Method 4 – Logbook

  • Your claim is based on the business use percentage of each car expense.
  • Car expenses do not include capital costs, such as improvements to your car.
  • You need a logbook to calculate the business use percentage.
  • You need odometer readings for the start and end of the period you owned or leased the car.
  • You can claim fuel and oil costs based on odometer records.
  • You need written evidence for all other car expenses.

Note that you can only claim a depreciation expense if you own the car or hire it under a hire purchase agreement and you use Method 3 or Method 4 to calculate your car expenses. If you lease a car that is not a luxury car, you cannot claim a depreciation expense because you are not the owner of the car.

This blog has been prepared for the purposes of general information and guidance only. It should not be used for specific advice or used for formulating decisions under any circumstances. If you would like specific advice about your own personal circumstances please contact our office. We can help make sure the right method is used to give you the maximum possible tax deduction.