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Claiming a deduction for car expenses 1 2 3

Calculating your deduction Claiming car expenses ‐ what trips are work‐related? Claiming a deduction for car expenses using the logbook method

1. Calculating your deduction You can use one of the four methods summarised below to work out your car expenses. Ensure you have the necessary evidence for the method that you choose. Method 1 – Cents per kilometre • Your claim is based on a set rate for each business kilometre. • You can claim a maximum of 5,000 business kilometres. • You do not need written evidence. Method 2 – 12% of original value • Your claim is based on 12% of the original value of your car. • The value is subject to luxury car limits. • Your car must have (or would have) travelled more than 5,000 business kilometres in the income year. • You do not need written evidence. Method 3 – One‐third of actual expenses • You claim one‐third of your car’s expenses. • Your car must have (or would have) travelled more than 5,000 business kilometres in the income year. • You need written evidence or odometer records for fuel and oil costs. • You need written evidence for all the other expenses for the car.

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Method 4 – Logbook 1. Your claim is based on the business use percentage of each car expense. 2. You need a logbook so you can work out the percentage. 3. You need odometer readings for the start and end of the period you owned or leased the car. 4. You can claim fuel and oil costs based on odometer records. 5. You need written evidence for all the other expenses for the car.

2. Claiming car expenses - what trips are work-related? 2.1

Using your car for work

You cannot claim the cost of normal trips between home and work as that travel is private. You cannot claim it even if: • you did minor tasks – for example, picking up the mail on the way to work or home • you had to travel between home and work more than once a day • you were on call – for example, you were on standby duty and your employer contacted you at home to come into work • there was no public transport near where you worked • you worked outside normal business hours – for example, shift work or overtime, or • your home was a place of business and you travelled directly to a place of employment. You can claim the cost of trips between home and work if: • you used your car because you had to carry bulky tools or equipment that you used for work and could not leave at work – for example, an extension ladder or cello • your home was a base of employment – you started your work at home and travelled to a workplace to continue the work, or • you had shifting places of employment – you regularly worked at more than one site each day before returning home.

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2.2

Travel between two workplaces

You can claim the cost of using your car to travel directly between two separate places of employment – for example, when you have a second job. Example Will is a clerk at a large department store. During 2011‐12 he used his own car to travel from his normal place of employment to his second job as a waiter. After finishing work as a waiter, he went directly home. Will’s travel cost from his normal place of employment to his second job is an allowable deduction. However, he cannot claim the cost of travelling home from his second job. You can claim the cost of using your car to travel: • from your normal workplace to an alternative workplace – for example, a client’s premises – while still on duty and back to your normal workplace or directly home, or • from your home to an alternative workplace for work purposes and then to your normal workplace or directly home. Example Bec is a clerk at a large department store in the city. In 2011-12 she was required to attend meetings at her employer’s other store in the suburbs. She used her own car to travel to the meetings. As the meetings finished late, Bec went directly home after the meetings. Bec can claim the cost of each journey.

3. Claiming a deduction for car expenses using the logbook method 3.1

What is the logbook method?

Using the ‘logbook’ method, you work out the business use percentage of your car. You can then claim this percentage of each car expense. Car expenses do not include capital costs such as the purchase price of your car or improvements to it. You must keep: • a logbook • odometer records, and • written evidence for all your car expenses except fuel and oil costs.

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3.2

Business use percentage

You can claim the business use percentage of all your car expenses. To work out your business use percentage, use the details from your logbook and odometer records. From your records, work out the total kilometres you travelled. Work out how many were business kilometres. Divide this number by the total number of kilometres travelled. Multiply the answer by 100. Example At the end of the logbook period, Tim’s logbook shows that he travelled a total of 11,000 kilometres of which 6,600 were business kilometres. Tim would work out his business use percentage like this: 6,600 11,000

X

100 =

60%

This is the business use percentage Tim would use to work out his car expenses claim. It is in your interest to write in the logbook all journeys you make in your car for work activities. If a work‐ related journey is not recorded, the logbook will indicate a lower business use percentage than it could.

3.3

Did the pattern of use of your car change during 2011-12?

If the pattern of use of your car changed, make a reasonable estimate of what your business use percentage would have been for the whole of 2011-12, taking into account your logbook, odometer and other records, any variations in the pattern of use of your car and any changes in the number of cars you used in the course of earning your income.

3.4

Your logbook

Your logbook is valid for five years. If this is the first year you are using this method, you must have kept a logbook during 2011-12. The logbook must cover at least 12 continuous weeks. If you started to use your car for business purposes less than 12 weeks before the end of 2011-12, you are able to continue to keep a logbook into 2012-13 so that your logbook covers the required 12 weeks. If you want to use the logbook method for two or more cars, the logbook for each car must cover the same period.

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If you have not kept a logbook since 2006–07, you must have kept a new logbook for 2011-12. If you did not keep a new logbook for 2011-12, you cannot use the ‘logbook’ method. You must use another method. Where you have kept a logbook for 2011-12 it must contain the following information: • when the logbook period begins and ends • the car’s odometer readings at the start and end of the logbook period • the total number of kilometres that the car travelled during the logbook period • the number of kilometres travelled for work activities based on journeys recorded in the logbook. If you made two or more journeys in a row on the same day, you can record them as a single journey • the business use percentage for the logbook period. If you established your business use percentage using a logbook from an earlier year, you need to keep that logbook and maintain odometer records. You also need a logbook if we told you in writing to keep one. We do not supply logbooks. Pre‐printed logbooks are available from stationery suppliers or you can draw up your own.

3.5

Logbook entries

Your logbook must also show details of each business trip. You must write down: • the date the journey began and the date it ended • the car’s odometer readings at the start and end of the journey • how many kilometres the car travelled on the journey, and • the reason for the journey. The logbook entries must be made at the end of the journey, or as soon as possible afterwards, and they must be in English.

3.6

Odometer records

You must keep written odometer records for the period you owned or leased the car during 2011-12. You need to record: • the car’s odometer readings at the start and end of the period, and • the make, model, engine capacity and registration number of the car.

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Odometer records can be kept as part of your logbook if you kept one for 2011-12. If you did not keep a logbook in 2011-12, you need to have a separate record of the odometer readings and other details.

3.7

Working out your claim

Once you have worked out your business use percentage, you can apply it to your car expenses. You need to keep written evidence of all your car expenses except fuel and oil costs ‐ for example, for registration, repairs, interest and insurance. There are two ways to work out your fuel and oil costs: • use your fuel and oil receipts, if you have them • make a reasonable estimate based on your odometer records. Example Bayden’s odometer records show he used his car to travel a total of 7,000 kilometres during 2011-12. Based on the manufacturer’s guidelines, he estimated that the car used 10 litres of fuel per 100 kilometres travelled and the average fuel price for the period was $1.20 per litre. Bayden would work out his fuel claim like this: 7,000 X 10 = 700 litres 100 700 X $1.20 = $840 This is the amount Bayden would include for fuel in step 1. Complete the following steps to work out how much you can claim using the ‘logbook’ method. Step 1 Add up your total expenses for fuel and oil, registration, insurance, interest, repairs and maintenance, the decline in value or lease payments and any other costs of running your car. Step 2 Multiply the amount you worked out at step 1 by your business use percentage. The answer is the amount you can claim. Source: http://www.ato.gov.au

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