The ATO is cracking down on car-related deductions – Here’s how to avoid paying fines.July 01 2019
With roughly 40% of all work-related tax deductions being car related, the ATO has recently limited the variety of deductions that can be made. As with all areas of tax it is important to understand exactly what you can and can’t claim – an issue which has become far more confusing for some with the rise in popularity of car sharing platforms such as Car Next Door. An interview with Will Davies, CEO of peer-to-peer car sharing platform proved the rise was substantial as he stated ‘The number of bookings per vehicle is up 40 percent… with the number of members signing up to borrow tripling… in the last 18 months’
In light of this increases Mr Davies offered clarification around tax requirements whether a vehicle is used as a rental or simply for work purposes. Below we feature six common pitfalls
1. Keep a record
“One of the most common mistakes car owners make is claiming car costs using the ATO’s cents-per-kilometre method, without the records to back them up.
“You can claim up 5000km a year at 68c per kilometre in 2019 tax year, but this is not a ‘free pass’ – you must be able to provide documentation.
“If you rent your car out, the car-share platform should be able to provide you with a summary of all of the kilometres driven during bookings, to make it easy to claim.”
2. Carrying equipment not-required by your employer is not claimable.
“If you can’t prove this is required by your employer or there’s no safe place to store your equipment at work, then it’s not claimable.”
3. Normal travel to and from work can’t be claimed
“This isn’t claimable, even if you do a small work-related task like picking up the mail. Even if there’s no public transport available when you head home after working overtime, it’s not claimable either.”
4. You can’t claim on Salary-sacrificing agreements
“Be careful not to ‘double dip’ on car expenses – you can’t claim expenses that have already been paid for by your employer, including salary sacrificing arrangements.”
5. Deprectiation shouldn’t be overlooked
“Many car owners forget to include depreciation when they’re adding up their annual car expenses at tax time.
“If you use your car for work or rent it out, ask your accountant about how you should calculate depreciation as it may add thousands to your allowable deductions.”
6. Claim all allowable expenses for renting your car out
“Any money you earn from renting out your car is considered taxable income and must be declared on your tax return, but you can also claim expenses for the portion of your car costs that relate to the rental activity, or a simple 68 cents for every kilometre your car is driven by borrowers.”
While renting a car out, Mr Davies noted that the entire membership fee as well as common expenses such as registration, insurance, fuel and servicing costs can be claimed.
According to both Car Next Door and the ATO, the following things are tax deductible on work-related car expenses:
- Carrying tools or other equipment needed for your job
- Travelling from home to an alternative workplace (like a client’s office) then back to your main workplace or home
- Travelling to meetings, conferences or events required by your employer
- Travelling between two separate workplaces where you are employed and delivering or picking up items, as required by your employer.
Disclaimer ** check this disclaimer is ok
WLTH does not provide tax advice. This article is for informational purposes only, and is not intended to provide tax advice.
For tax advice relevant to you consult an independent tax advisor or contact the ATO