Understanding Car Expense Deductions for Australian Tax Returns
As millions of Australians prepare to file their tax returns, many are eyeing potential deductions for car expenses linked to work-related travel. However, the Australian Taxation Office (ATO) has issued a crucial reminder about common pitfalls that could jeopardise these claims.
Claiming Deductions: The Basics
If your vehicle is used for work, you may be eligible to claim deductions via two primary methods: the cents per kilometre method and the logbook method. The first option is straightforward, allowing you to claim up to 5,000 kilometres annually at a rate of 88 cents per kilometre, translating to a maximum deduction of $4,400.
Essential Records Required
An ATO representative emphasised that a significant mistake often made by taxpayers is claiming car expenses without adequate supporting records. To qualify for the cents per kilometre method, it’s crucial to demonstrate ownership of the vehicle, its use for business purposes, and a clear account of work-related kilometres. The ATO suggests maintaining a diary or using the myDeductions feature within the ATO app for accurate record-keeping.
If you opt for the logbook method, you will need to keep more comprehensive records, which include detailed usage data.
Tax Claims in Numbers
In the 2023-24 income year, approximately 3.6 million Australians claimed nearly $10.3 billion in car expenses, with the cents per kilometre deduction standing out as one of the most scrutinised and generous claims available without needing to present receipts.
Belinda Raso, director at Tax Invest Accounting, noted a tendency among taxpayers to assume automatic eligibility for this deduction, often lacking clarity about when it can be legitimately claimed. Many mistakenly claim the full 5,000 kilometres without fully understanding the rules.
Raso cautioned that due to the significant nature of this deduction, the ATO is vigilant, and individuals must be able to justify their claims, especially if audited. Clear records of work-related trips, including distances travelled and the purpose of each journey, are essential for substantiation.
Defining Work-related Travel
To qualify for the deduction, trips must be work-related, differentiating them from regular commuting. Travel from home to the office typically does not qualify, except under specific circumstances. The ATO stipulates that claimable travel must be associated with tasks like attending training, meetings, or visiting different job sites – but it should not merely be on the way to or from home.
Conclusion
As Australians approach tax season, understanding the intricacies of claiming car expense deductions is vital. Proper record-keeping and awareness of ATO guidelines can significantly affect the legitimacy and success of claims. For further details on what can be claimed and to avoid common mistakes, visit the ATO’s website for more comprehensive guidance.
