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Are you required to use your car for work purposes?

Did you know there are four methods to choose from in order to calculate your motor vehicle deductions?

Firstly, you must identify the “business” kilometres travelled in the course of producing your assessable income or between workplaces. For more guidance on what is eligible work related travel, click here.

Once you have established your eligible business kilometres, you have one of four methods to choose from. The table below is a summary of each of these methods.

Motor Vehicle expenses

Method 1 – Cents Per Km Method

To use this method :

You do not need written evidence but you need to be able to show how you calculated the business kms for the year.

Your claim is based on a set rate for each business km travelled up to a maximum of 5,000 kms regardless if you travelled > 5,000 business kms.

Motor Vehicle Rates

Method 2 – 12% of Original Value Method

To use this method :

Your car must have travelled > 5,000 business kms during the financial year.

You do not need written evidence but you need to be able to show how you calculated your business kms for the year.

If you bought the car, you can claim 12% of the original cost of the car. If you leased the car, you can claim 12% of its market value at the time you first leased it.

The maximum allowable deduction is 12% of the luxury car limit in the year in which you first used or leased the car.

Method 3 – One Third of Actual Expenses Method

To use this method :

Your car must have travelled > 5,000 business kms during the financial year.

You must have written evidence for all running costs such as insurance, registration, etc.

You may also need to show how you worked out your business kilometres and any reasonable estimate you made.

Odometer records need to show the odometer reading of the car at the start and end of the period that you owned or leased the car. They should also show the car’s engine capacity, make, model and registration number.

Method 4 – Logbook Method

To use this method :

Your car must have travelled > 5,000 business kms during the financial year.

You must have keep a logbook to calculate the business use %.

You must have kept a logbook during the first year this method is used and this will be valid for 5 years. The logbook must cover at least 12 continuous weeks.

You must have odometer readings for the start and end of the period you owned or leased the car.

You must have written evidence for all running costs such as insurance, registration, etc.

Ask Us Tax professionals will assess the best method available for your motor vehicle deduction. For more information in relation to your motor vehicle deduction at tax time, please visit our contacts page or contact us via email at info@askustax.com.au