As 30 June approaches, the Australian Taxation Office (ATO) is making it clear that they will be keeping a close eye on work-related car expenses as part of a broader focus on work-related expenses. In the 2016-17 FY alone, more than 3.75 million people claimed on car expenses, to the tune of $8.8 billion. Every year, around 870,000 people claim the full 5,000kms allowed under the cents per kilometre calculation method.
Assistant Commissioner Kath Anderson is at the forefront of the discussion advising “we are particularly concerned about taxpayers claiming for things they are not entitled to, like private trips, trips they didn’t make, and car expenses that their employer paid for or reimbursed”. Ms Anderson has also indicated that due to improvements in technology and data analytics, the ATO will be better equipped to identify false claims by comparing taxpayers to others in similar industries with similar incomes.
With that being said, it is pertinent to remind taxpayers what they can and cannot claim for when tax time comes to ensure no penalties are applied for failing to take reasonable care.
What CAN you claim?
The three questions that need to be asked when determining whether or not expenses are tax-deductible are:
1. Have you spent the money yourself (and have not been reimbursed)?
- If travel or car expenses have been reimbursed by an employer, including through a salary sacrifice scheme, trying to claim on them again is referred to as ‘double-dipping’ and the ATO has been clear that this is not an acceptable practice.
- If a vehicle is owned or paid for by an employer, including via a novated lease, then car expenses are not deductible to yourself.
2. Is the claim directly related to your job?
- This does not include standard to and from work travel as this is considered a private expense, regardless of how far the travel may be.
- Site-to-site travel is deductible, as is travel to and from work if you are required to transport bulky tools/equipment and there is no option to store these on site.
3. Do you have proof of the travel and its necessity for your occupation?
- The ATO may request proof that you were required to undertake the travel for work. A logbook or something similar can be used as proof, and there may be grounds to contact an employer to discuss the eligibility of said travel.
If the answer to all three questions is yes, then the travel is likely eligible to be claimed on.
How to calculate travel
Travel can be calculated based on a cents per kilometre method, which limits the claim to 5000kms, or using a logbook, which can be used to determine the work-related fraction of driving undertaken throughout the year.
Using the myDeductions tool in the ATO app can help simplify record keeping using a choice of odometer readings, point-to-point journeys or GPS tracking. This information can then be given to a tax agent or uploaded directly to myTax.
If you are unsure about whether or not your car expenses can be claimed as work-related, please don’t hesitate to get in touch with us on (07) 3391 5055 or via firstname.lastname@example.org.
Disclaimer: This article contains general information only and is not intended to constitute financial product advice. Any information provided or conclusions made, whether express or implied, do not take into account the investment objectives, financial situation and particular needs of an investor. It should not be relied upon as a substitute for professional advice.