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Changes to Motor Vehicle Tax Deductions for Small Business Owners
As a small business owner, navigating the ever-changing landscape of tax regulations is a crucial aspect of managing your finances. The 2022-23 income year has brought about significant changes to motor vehicle deductions. Staying informed about these changes can directly impact your ability to maximise deductions and minimise your tax burden.
Cents per Kilometre Method for Car Expenses:
For small business owners who use their vehicles for business purposes, claiming car expenses through the cents per kilometre method has been a popular choice. This method allows you to claim a fixed rate per kilometre travelled for work-related purposes. In the 2022-23 income year, the rate has increased from 72 to 78 cents per kilometre.
One of the advantages of the cents per kilometre method is its simplicity. Under this approach, you can claim a maximum of 5,000 kilometres per car annually, and the 78 cents per kilometre rate covers all your vehicle running expenses, including registration, fuel, servicing, insurance, and depreciation. However, it is essential to note that you cannot claim these costs separately if you choose to use this method.
Car Limit for Business Owners:
Another notable change impacting your tax deductions is the increase in the car limit for the 2022-23 income year. The car limit has risen to $64,741, and it determines the maximum value used to calculate the depreciation of passenger vehicles designed to carry less than one tonne and fewer than nine passengers. It is crucial to understand that this limit applies to passenger vehicles and excludes motorcycles and similar vehicles.
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 feel free to contact us on 02 9411 5422. We can help make sure the right method is used to give you the maximum possible tax deduction associated with any of these methods.