If you’re using your car for work purposes, you may be eligible to claim certain car expenses on your tax return. However, it’s important to understand what qualifies as a legitimate work-related car expense and how to calculate it accurately to avoid issues with the Australian Taxation Office (ATO). Here’s a breakdown of what you can claim.
1. Vehicle Depreciation
One of the biggest expenses you can claim is the depreciation of your car. The ATO allows you to claim a deduction for the decline in value of your vehicle over time, as long as it is used for work purposes. However, you can only claim depreciation for the portion of your car’s use that is work-related. If you use your vehicle for both personal and work reasons, you’ll need to apportion the claim accordingly.
2. Fuel Costs
Fuel costs are one of the most common car-related expenses that you can claim. If you use your car for work-related travel, you can claim a deduction for the fuel you use. Again, it’s essential to keep a detailed log of how much fuel was used for work versus personal purposes.
3. Repairs and Maintenance
Expenses for repairing and maintaining your vehicle can also be claimed. This includes costs for things like oil changes, tire replacements, and general maintenance. As with other expenses, only the work-related portion is deductible, so you must keep a clear record of work-related trips to ensure accurate claims.
4. Insurance
You can also claim the cost of insuring your car, provided the insurance is for the portion of your car’s use that is work-related. If your insurance covers both personal and work use, you will need to apportion the cost accordingly.
5. Registration and Licensing Fees
Car registration fees and any licensing fees associated with operating your vehicle for work purposes are also deductible. Like other expenses, you should split these fees between work and personal use based on your usage.
6. Interest on Car Loans
If you have taken out a loan to purchase your vehicle, the interest on that loan can be claimed as a deduction for the work-related portion of your car use. You must calculate the percentage of time the vehicle is used for work to accurately determine the amount you can claim.
7. Tolls and Parking Fees
You can deduct any tolls or parking fees incurred during work-related travel. Keep your receipts and records of the trips to ensure you can claim these expenses correctly. Also keep in mind that you
Keep Accurate Records
It’s crucial to maintain detailed records of all car expenses and work-related usage. The ATO recommends keeping a logbook for a 12-week period every five years to determine the proportion of your car use that is work-related. You must record the dates of the journeys, odometer readings, kilometres travelled and a description of the trip. You can also use apps like Driversnote to track your mileage and expenses. The more precise your records, the more accurately you can claim.
In conclusion, understanding what car expenses are deductible can help you save money at tax time. Just ensure you’re only claiming expenses that are directly related to your work usage, and always keep detailed records to back up your claims. If you’re ever unsure, feel free to give us a call to chat to one of our accountants.
