Driversnote
Driversnote is a leading platform that keeps your logbook up to date by documenting all your personal and work trips.
Business Guide — Setting up
A guide for keeping track of tax expenses for business vehicles
Using your vehicle for work? Find out what expenses are tax-deductible and the best way to keep track of them.
3 MINS READWhat vehicle-related expenses could be tax deductible? This is a recurring question for many small businesses, especially during the start-up phase.
Whether you’re a tradie starting your own plumbing business, or an employee for a courier service, one of the first things that come to mind is work claims. With a dedicated ute or small car, it suddenly seems like every single drive is claimable. However, costs associated with operating a vehicle or truck are only tax deductible under certain circumstances. This may seem puzzling at first, but claiming vehicle expenses really isn’t all that complicated.
Simply put, if you run a business that travels between two places of work, carries specialised tools or equipment, delivers or collects supplies, attends work-related conferences, or visits clients and suppliers for meetings, you may be able to claim these trips as business expenses.
However, if your business has employees that use your business vehicles for private use (including driving to and from work) then you may need to pay Fringe Benefits Tax (FBT) on the private use. Maintaining a logbook may assist in reducing the FBT liability. We strongly recommend you consult your accountant or tax adviser.
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What vehicle costs can you claim?
Under ATO (Australian Taxation Office) guidelines, you may be able to claim employment-related vehicle expenses if they are incurred while you are using your own vehicle to perform a job.
This includes:
- Fuel and oil
- Repairs and servicing
- Interest on a motor vehicle loan
- Lease payments
- Insurance cover premiums
- Registration
- Depreciation*
*Car depreciation limits apply.
How do you track vehicle-related costs?
There are two main ways of claiming vehicle-related expenses in Australia: the logbook and cents-per-kilometre method. These methods apply to sole traders or employees using their own vehicles for work related purposes.
Cents-per-kilometre
With this method, a single, fixed rate is applied to your travel mileage.
- You’re able to claim up to 5,000 kilometres per year
- The claim is calculated by multiplying the total business-related kilometres you travel by the standard fixed rate of cents per kilometre. Current ATO rates can be found here.
- Written evidence for this method may be required to indicate how you’ve worked out your business kilometres. Diary records of business journeys are sufficient.
Logbook method
Under the logbook method, your claim is based on the business-use percentage of your vehicle-related expenses (the percentage split between work and personal driving).
- You determine your business-use percentage by keeping track of your expenses for a minimum of 12 weeks in a log book (it can be purchased from a stationary store or downloaded as an app).
- Within it, you log all business journeys made in your vehicle during the set time period, including; the period that the log book begins and ends, the vehicle’s odometer readings at the beginning and the end of this period, total kilometres driven, as well as start and finish times and reasons for the journey.
- It’s important to keep all your receipts gathered throughout the year to justify your claims, including receipts for servicing and repairs.
Which method should you use?
Generally speaking, you should consider the advantages and disadvantages of each method and consult your accountant to figure out what method is best suited to you. However, if you keep a logbook and all of your receipts, you can then calculate your claim under both methods and determine which method gives you the greater claim.
Helpful apps for keeping track of mileage
These days, technology has made it easier to keep track of mileage. The tedious task of writing down every single trip can now be automated with helpful apps. We’ve selected a few ATO-compliant logbook apps that feature GPS tracking and great mileage reporting.
GoFar
The GOFAR logbook app turns your tax deduction claim into a one-swipe exercise.
Disclaimers
This information provided is of a general nature and for information only. Nothing in this article constitutes or should be considered to constitute legal, taxation or financial advice. Before making a decision about any of the products and services featured on this article, you should consult with your own independent legal, taxation and financial advisors, who can advise you about your personal circumstances.
