How much you can claim for your motor vehicle will depend on your business situation. If your business is a company or trust then you can claim deductions for expenses relating to the motor vehicle that the business owns. However, if the motor vehicle is used for private purposes then you may be subject to fringe benefits tax (FBT).
There are various methods of claiming work related car expenses that the tax office allows for a car that you own, lease or hire. You are able to use the method that gives you the biggest deduction provided you have the evidence that is required. Each motor vehicle must be calculated separately.
Business Owned motor vehicle
Where the business owns the motor vehicle there are two methods to use for fringe benefits purposes which are
- The statutory formula method. This is calculated by the number of days during the FBT year that the car is available for private use by the employee. This method will be automatically used by default by the tax office unless you ‘elect’ to use the operating cost method.
- The operating cost method. This is calculated by the business/private usage by using a logbook.
The ATO website has a fringe benefit tax – car calculator where you can make some calculations on line to determine which method suits your business the best
Privately owned motor vehicle for sole traders or partnerships
Work-related motor vehicle expenses are expenses you incur in the course of performing your work. You cannot claim the cost of normal trips between home and work as the expense is private. You can a full deduction for a truck, van or ute that has been heavily modified for business use, or where private use is restricted to home-to-work travel and minor other use
Method 1 – Cents per kilometre method
This claim is based on a set rate for each business kilometre and you are able to claim up to a maximum of 5,000 business kilometres even if you have travelled more than this for business purposes
Method 2 – 12% of original value method
Your claim is based on 12% of the original value of the car when you purchased it and that you would have travelled more than 5,000 business kilometres for the year
Method 3 – one third of actual expenses method
This claim is based on one third of the car expense and must have travelled more than 5,000 business kilometres. You must have written evidence of the odometer records and fuel and other expenses
Method 4 – logbook method
This method is based on the business use percentage. You do need to keep a log book to substantiate how you worked out your percentage. You also need to have written evidence for all your expenses and keep odometer records on how your estimates were based
Please let us know any thoughts or suggestions you have?