Make sure you use the correct calculation method. Different rules apply depending on your business structure and the type of vehicle you are claiming for:
Types of vehicles:
Cars (for income tax purposes) are defined as motor vehicles (including four-wheel drives) designed to carry both:
- a load less than one tonne
- fewer than nine passengers.
Other vehicles include:
- vehicles designed to carry either
- one tonne or more (such as a utility truck or panel van)
- nine passengers or more (such as a minivan).
Company or trust
You must use the actual costs method to work out motor vehicle expenses, regardless of the type of motor vehicle. This applies to both cars and other vehicles.
Sole trader or partnership
There are two ways you can claim the business usage of your car. For other vehicles, you must use the actual costs method. These are:
- The cents per kilometre method, or
- The Logbook method.
Cents per kilometre method
Under this method you can claim a maximum of 5,000 business kilometres per vehicle per year, provided the distance was actually travelled. However you cannot make a separate claim for depreciation or any operating costs.
For 2019-20 years, the cents per kilometre method is set at 68 cents per kilometre, however it has been increased to 72 cents per kilometre for 2020-21.
Under this method you need to have retained documentary evidence of your running costs, and to keep a logbook for a minimum 12 week period. Each logbook must contain the following information:
- The beginning and end dates of the logbook period, plus the car's odometer readings at these dates
- The total number of kilometres the car travelled during the logbook period
- The odometer readings at the start and end of each income year you use this method
- The business-use percentage for the logbook period
- The make, model, engine capacity and registration number of the car
- For each business journey, record the:-
- Start and end dates and odometer readings for the journey
- Kilometres travelled
- Reason for the journey
The allowable claim is calculated as follows:
- Divide the distance travelled for business by the total distance travelled;
- Multiply by 100 to provide the business use percentage;
- Determine your total expenses, including depreciation, for the income year. You must retain documentary evidence of your running costs;
- Multiply the total expenses by your percentage to find the total amount you can claim.
When you commence using the logbook method, it is important to keep a logbook during the income tax year for at least 12 continuous weeks, and that 12 weeks period needs to be representative of your travel throughout the year. The business use percentage calculated using the logbook method can be used for up to five years, or until your business use varies by more than 10%, whichever comes first. More information regarding the log book method can be found here.
Dawson & Partners App
Our Dawson & Partners App provides an automatic mileage tracking tool that can assist you with the logbook method. This tool will record your mileage at the press of a button. Just simply tap on the start button and the App starts tracking your journey. Once you have finished your journey, hit stop then give it a name. All data is now automatically synced in the cloud, so you can record your journeys and track/submit your expenses with ease.
If you haven't downloaded our free App, please head to the Apple or Android store on your device and search for MyAccountants and enter the code DAWSON to start benefiting from this technology today.
Alternatively, you can download the App using the links below:
Click here to download on Android
Click here to download on Apple
Please contact us on 1300 885 761 for more information regarding motor vehicle expense claims.