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Do you use your car for work or in your business?
YES? ... You should speak with us here at Paris Financial about claiming this in your Income Tax Return.
But, be aware that the ATO have strict rules about what and how car use can be claimed.
The biggest mistake that the ATO have found recently is people claiming for private trips in their car. Work related trips DO NOT include getting to your normal place of employment and home again, this is private.
Work related trips do include the following:
Home to work trips only apply when:
- You had to cart a really big bunch of stuff to work – like extension ladders, wheelbarrows and other bulky tools. A small bag of tools or a briefcase is not bulky enough. If there is a secure place in which these things can be stored at work then the ATO would obviously ask why are you taking them home at all?
- If you start work at home (as it is your base of employment) and then travel to work (not including firing off an email or two early and then heading into the office).
- You don’t really have a place of employment, you travel around lots of different sites all day.
Work related trips also include:
- If you have two jobs – the travel from Job 1 to Job 2.
- From your normal place of employment to another office, site or similar and back to the normal place or directly home.
- Home to an alternative office, site or similar, then on to the normal place of employment or directly home.
So now that we have worked out what can and cannot be treated as business kilometres we can discuss how the claim can be calculated and substantiated:
- Using the cents per km method – you determine how many kms you have travelled for work purposes and then claim 66c per km (up to a maximum of 5,000km) The ATO are worried that taxpayers are simply claiming 5,000 km with no basis or reasonable calculations. The underlying message here is that you must have some form of reasonable estimate of the kms travelled.
- Keep a logbook. Under this method you need to keep a logbook for a 12 week period (there are a few apps available for smartphone users or an actual little printed book) that needs to be representative of your usual use. The resulting business percentage is used to claim a portion of all the costs of the car like fuel, rego, insurance, financing, depreciation, repairs & maintenance etc. If you are registered for GST and the car is used in a business, then some of the GST can be claimed as well. But, the logbook must be done, when you sell the car there might be increased tax, and there might also be GST payable back to the ATO. There is also a luxury cart limit on the GST and depreciation limiting the benefit of expensive cars.
Things can get even more complex when the car is used in a business structure like a trust or company – any private use needs to be calculated in a more complex way. This is something that should be discussed in person.
If you are unsure, the best thing you can do is ASK! Give us a quick call on 03 8393 1000, and explain what you are doing and why you think there might be a car claim in the future, we can tell you what you need to do (not what you should have done after it’s too late).
Ken Burk, Partner, Paris Financial
Image courtesy of Napong at FreeDigitalPhotos.net