The way you claim your car expenses for work-related travel will depend on whether you have a "non-commercial" or "commercial" vehicle.
While a non-commercial car can use two methods to claim a tax deduction-the set rate per kilometre method or the logbook method, a commercial vehicle can only use the logbook method.
Commercial Vehicles are typically a ute with a one-tonne tray-carrying capacity, such as the Ford Ranger, Nissan Navara, Mazda BT-50 and Hilux (but always check your vehicle handbook to be sure!). To claim a tax deduction on your commercial vehicle you have to use the logbook method, which includes keeping a valid logbook for 12 consecutive weeks commencing no later than 1 April, recording your odometer reading at 30 June each year and keeping all your receipts for vehicle expenses including fuel. Assuming your circumstances don't change, the logbook is valid for up to 5 years.
Non-Commercial Vehicles are your 'normal' cars, such as a sedan, hatchback, station wagon or a ute that has a tray-carrying capacity of less than one tonne. To claim a tax deduction on your non-commercial car, you can use either the set rate per kilometre method or the logbook method.
Using the set rate per kilometre method:
- This method is the easiest to use, and is suitable for your normal non-commercial cars.
- You can claim up to 5,000km travel at the ATO set rate for that year. For your 2021 tax, this is 72 cents per km.
- You don't need a logbook to use this method, a reasonable estimate is acceptable.
- We generally find that clients underestimate the amount of tax-deductible travel they do. It is best to keep a diary or record the travel on your smartphone.
Using the logbook method:
The logbook method can be used for all vehicles (commercial & non-commercial) when claiming tax deductible travel.
- Your logbook must be completed for 12 consecutive weeks and include all ATO required information.
- Your logbook can last up to 5 years (unless your circumstances significantly change).
- If you are using multiple vehicles, you need to keep a 12-week logbook for each vehicle at the same time.
A valid logbook must record:
- When the logbook period begins and ends.
- The car's odometer readings at the start and end of the logbook period.
- Total number of kilometres travelled during the logbook period.
- The number of kilometres travelled for each journey recorded in your logbook including the start and finish dates of your journey, the odometer reading at the start and end of the journey, the total kilometres travelled, and the reason for the journey.
- This must be done on a trip by trip basis, the ATO will not accept one entry per week even if you are travelling the same route.
- Business use percentage for the logbook period.
- Odometer readings at start and end of each year you rely on the logbook.
- This means you must record your odometer reading on 30 June each year.
What your logbook can do:
- Your tax-deductible usage is calculated by your logbook (e.g. 80% work-related travel with bulky tools and no secure lockup facilities).
- Your tax deduction is calculated as the logbook percentage of your cars running costs (fuel, registration, insurance, repairs and tyres) as well as depreciation and interest on your vehicle finance.
- The logbook method often results in a larger tax deduction.
What about receipts?
- You generally need to keep receipts for all expenses for your vehicle to claim them. For salary and wage earners, the ATO will allow bank statements and credit card statements to prove your expenses in some circumstances.
- For normal cars, you can estimate your fuel costs but not for commercial vehicles.
Here is an example of how it all works:
Peter is a mechanic and is required to provide tools for his work. His employer cannot provide a secure lockup facility, so Peter needs to carry his tools to and from work each day. The tools weigh more than 20 kg and are bulky. Peter would be entitled to claim a portion of his car costs as a tax deduction.
If Peter is driving a 2015 Ford Ranger XLT how can he claim his expenses? This vehicle has a tray carrying capacity (payload) of more than one tonne. Peter would need to have a valid 12-week logbook and keep all his vehicle receipts to claim a tax deduction. The work-related use in his logbook determines what percentage of his car expenses Peter can claim. He can also claim a portion of the vehicle depreciation and interest on the car finance.
What if Peter was driving a 2015 Holden Colorado LTZ? As this vehicle has a tray carrying capacity (payload) of less than one tonne, Peter has a choice on how to claim his car costs. He can use the logbook method or the set rate per kilometre. If using the set rate per kilometre, Peter could claim his work-related travel (up to a maximum of 5,000 km) at 72c/km for 2021 tax.
Don't forget you can always get in touch with us to ask more questions. You can contact us during business hours on (02) 4990 3775 or email us an firstname.lastname@example.org.