The ATO recently announced that work-related car expenses are one of their key focuses. We have recently seen clients receive this scrutiny and think it’s a timely reminder to ensure your record keeping for car expenses is up to scratch as any issues may lead to a review by the ATO.
Recent Case – ATO cross checks logbooks
A recent case before the courts (Reid v CofT), has indicated that the ATO uses external sources such as migration logs to disprove a logbook. With the electronic data now available, eTags and traffic cameras, there is a lot of information available to the ATO.
If you use your motor vehicle for work-related purposes the following two methods can be used to calculate your deduction:
Cents per kilometre
If you use this method, your claim is based on a set rate for each work-related kms travelled (68c per km from 1 July 2018). You need to show how you worked out your work-related kms (e.g. diary records of work-related trips). You can claim a maximum of 5,000 km per car.
If the claim is reviewed, it is essential that you can show how you calculated your claim as well as provide work-related car travel detail.
If you use this method, your claim is based on the percentage of work use of your car (with a logbook) and your actual expenses.
Your logbook must be kept for a minimum continuous period of 12 weeks and be typical of your work-related car travel. Odometer readings are required at the start and the end of each journey as well as the journey’s purpose, as well as a record of your odometer readings at the start and end of each income year. You only need to complete your logbook once every 5 years if your circumstances stay the same. If you buy a new car, you can use your existing logbook.
When calculating your car expenses you can either use your receipts to claim fuel and oil expenses, or you can estimate your expenses based on odometer readings for the period in which you used the car. For all other car expenses you claim, you must keep receipts. You will also need to keep details of how you calculated depreciation (decline in value of your car).
The ATO have provided 3 golden rules for taxpayers to remember to get it right when it comes to car expenses:
1. Generally, trips between home and work cannot be claimed, unless you are required to transport bulky equipment.
2. Don’t ‘double dip’ by claiming car expenses paid for or reimbursed by your employer.
3. make sure you keep records to prove how you worked out your claim.
For more information: ato.gov.au/carexpenses
Disclaimer: The information contained is general in nature. Professional advice should be sought before acting on any aspect on this page.