By Steven Castelletto
Are you using the best method for your motor vehicle claim?
Motor vehicle claims can often be a confusing subject for many taxpayers. With the strict ATO requirements to claim motor vehicle expenses, it’s no wonder a lot of taxpayers throw their hands up in the air and decide it isn’t worth the hassle or make common mistakes in their claim.
When it comes to claiming your business-related motor vehicle costs you have one of two methods available to you.
- Cents Per Kilometre method; and
- Logbook method
Cents per kilometre method is often the easier method to claim as it does not require written evidence (however in the event of ATO review you will be asked to show them how you calculated the kilometres claimed). The caveat on this however is that you can only claim up to a maximum of 5,000km and if you are eligible to claim GST, you will only be able to claim up to 1/3 of GST credits on motor vehicle running expenses. The current rate, from 1 July 2018, is 68 cents per kilometre.
If your business is heavily reliant on using your motor vehicle the cents per kilometre will often not be the most effective method to claim. This is where the Logbook method comes in. The Logbook method allows you to claim a tax deduction and GST credits for the business portion of your motor vehicle running costs. That is fuel, rego, insurance, tyres and repairs & maintenance. You are also able to claim a deduction for the business portion of depreciation and GST credits on the purchase of the vehicle.
As the name suggests, in order to utilise the Logbook method, you must hold a valid logbook. Without one the vehicle running costs cannot be claimed. A valid logbook only lasts 5 years and a separate logbook must be held for each vehicle used in the business, with the exception of replacement vehicles that don't undergo significant changes in usage during the logbook life. If you think your logbook is older than 5 years, ensure you start a new one, as any expenses claimed could be denied in the event of an ATO audit.
The ATO requires minimum information for each trip, so please visit the ATO website for information on what must be recorded in writing for a logbook: Logbook method.
While it can often be a daunting and frustrating task recording every trip made in your car for a minimum of 13 weeks, it is often worth the effort for the tax you could potentially save. In the modern age there are a lot of tools that can help reduce the monotony of recording your trips, such as smartphone apps that use the in-built GPS and even devices such as the GoFar which you can plug straight into any modern car's diagnostic adapter and send trip details directly to your smartphone.
If you’re unsure on which is the best method for your circumstances, feel free to contact your WDF team so we can run the numbers for you and ensure you are getting the most out of your motor vehicle claims.