Table of Contents
ATO Warns Car Owners on Common Tax Claim Mistakes
As tax season approaches, countless Australians who utilise their vehicles for work are preparing to claim deductions on car expenses. However, the Australian Taxation Office (ATO) has issued a crucial warning concerning frequent errors in this process.
For individuals who use their cars for work-related purposes, two primary methods are available for claiming deductions: the “cents per kilometre method” and the “logbook method.” The former is notably simpler, allowing claimants to deduct up to 5,000 kilometres at a rate of 88 cents per kilometre, amounting to a potential maximum deduction of $4,400.
An ATO representative highlighted that many taxpayers err by submitting claims without maintaining the appropriate documentation, emphasising the need to substantiate any claims made.
Documentation is Key
To effectively utilise the cents per kilometre method, claimants must demonstrate ownership of the vehicle, provide evidence of its use for business, and detail how work-related kilometres were calculated. Tracking work-related trips can be streamlined using a diary or the myDeductions tool available in the ATO app.
If opting for the logbook method, more comprehensive records must be kept, which include specific details of trips made for work purposes.
Common Misunderstandings
According to Belinda Raso, director at Tax Invest Accounting, a significant number of individuals assume the $4,400 deduction is automatic and are often unaware of the valid criteria for claiming. “Many people simply claim 5,000 kilometres without understanding the rules on when deductions can be made,” she said.
Raso reiterated the importance of meticulous record-keeping, stating, “It’s crucial to track your journeys, as the ATO scrutinises this deduction heavily.” Even if claimants initially do not require a logbook, those selected for an audit must be prepared to defend their claims with detailed records of their travels.
What Qualifies for a Claim?
To be eligible for vehicle expense deductions, the travel must be for work purposes. Travel from home to a regular workplace does not qualify unless specific exceptions apply. Raso added that trips undertaken for training, meetings, or errands for an employer can qualify, provided they occur during working hours and are not part of the standard commute.
The ATO further clarifies that claims under the cents per kilometre method can only be made per car each year, ensuring that individuals only claim for the vehicle they primarily use for business purposes.
For further information on what trips are eligible for deductions, visit the ATO’s official website.
Stay Informed
For the latest updates on tax deductions and other financial news, follow Yahoo Finance Australia on their social media platforms, including Facebook, LinkedIn, and Instagram.
As millions of dollars in car expenses are claimed each year—amounting to around $10.3 billion in the 2023-24 income year—it is essential for taxpayers to remain diligent and well-informed to maximise their legitimate claims while avoiding unnecessary pitfalls.
For individuals seeking to navigate the nuances of car expense claims effectively, understanding and adhering to ATO guidelines is paramount to ensure compliance and optimise tax benefits.
