Wednesday, 23 March 2016

Changes to work-related motor vehicle deductions

There was a subtle, but important, change to the way you can claim your motor vehicle expenses as a tax deduction from 1st July 2015.
What are the changes?
Previously, individuals had the option to use one of four methods to determine their work-related car expenses:
  • Cents-per-kilometre
  • Logbook method
  • The 12% of original value method, and
  • One-third of actual expenses incurred.
Commencing 1 July 2015, the changes are:
  • The 12% of original value will not be available to use
  • The one-third of actual expenses incurred will not be available to use, and
  • The three existing rates for cents-per-kilometre, determined by engine size, will be replaced with one rate of 66c per kilometre.
This means you will be able to use either the cents per kilometre method or the logbook method.

Let us simplify the remaining methods for you:
The cents-per-kilometre method
  • Your tax deduction is based on the number of business kilometres travelled for the year
  • These business kilometres are multiplied by 66c to work out your tax deduction. For example the tax deduction on 3,000 business kilometres would be $1,980.00 (3,000 x 0.66)
  • The maximum business kilometres you can claim is 5,000, or $3,300.00.
Since the cents-per-kilometre method has changed to 66c per business kilometre, it is a good time to consider using the logbook method. That is, if you think the deduction you could claim under the logbook method would be higher than the maximum $3,300.00 under the cents-per-kilometre method.
Logbook method
  • The deduction under the logbook method is based on the actual running costs of your car
  • The actual running costs are then multiplied by your business use percentage to calculate your tax deduction
  • To work out your business use percentage you must keep a logbook of the vehicle usage for a minimum of 12 weeks
  • Unless your circumstances change, you only need to do a logbook once every 5 years
How easy is that?!
There’s just one catch: you need to complete the logbook in the same year as you are claiming the tax deduction. Therefore if you haven’t kept a logbook in the past you need to start one now!
If you have any questions in relation to these changes, or want our logbook template, please do not hesitate to contact us.
Our office will be closed for the Easter break – we wish you a happy and safe long weekend.