As the 2023–24 financial year draws to a close, it’s time to start preparing your tax return. If you use your car for work, there are several expenses you may not be aware of that are tax deductible. Here’s a simple guide that will help you navigate what you can claim.
Understanding Work Related Car Use
Before diving into deductible expenses, it’s crucial to determine if your car usage qualifies as work related. Unfortunately, your daily commute to and from work doesn’t count, if only right! However, if you make a journey DURING the workday, such as travelling from one office to another or to visit a client or supplier, these ARE considered work related and their associated costs are deductible.
For detailed information on what qualifies as work-related travel, visit https://www.ato.gov.au/individuals-and-families/income-deductions-offsets-and-records/deductions-you-can-claim/cars-transport-and-travel.
Tax Deductible Car Expenses
Petrol and Fuel Costs
Fuel is one of the most obvious tax-deductible car expenses, and if your car use is work-related, you can claim this cost. You can do this by using the cents per kilometre method, which allocates 85 cents for every kilometre traveled for work (up to 5000 km) for the 2023/24 financial year. This rate can be applied to fuel, registration, servicing, insurance, and depreciation!
Repairs and Servicing
Maintenance costs such as repairs and servicing are also deductible so any repairs your car needs as well as the regular routine servicing to stay operational for work purposes are also expenses that can be claimed on your tax return.
Insurance
Car insurance premiums can be claimed if your car is used for work related travel too, just ensure you keep detailed records of your insurance payments to support your claim.
Cleaning Costs
If you clean your car specifically for work purposes, such as preparing for client meetings or presentations, these costs can also be claimed.
Travel Expenses
Expenses such as parking fees and tolls incurred during work-related journeys are also tax deductible. These are considered travel expenses, not car expenses, and can be claimed in addition to the cents per kilometre rate.
Electric Vehicles and Charging Costs
For those using electric vehicles (EVs), the ATO has introduced a flat rate of 4.2 cents per kilometre of work travel to simplify claiming charging costs. Additionally, the cost of installing a home charger can be claimed as a depreciating asset, based on the percentage of work-related use.
Home Charging Installation
The installation of a home charger is considered a capital cost. You can claim a portion of this expense in line with your car’s work use percentage. For example, if your EV is used 50% for work, you could claim half the cost of the charger as a depreciating asset, to be written off over time.
ATO’s Golden Rules for Tax Deductions
To claim any expense, it must meet the ATO’s three golden rules:
- You must have spent the money and not been reimbursed.
- The expense must directly relate to earning your income.
- You must have a record to prove it, such as a receipt.
For more details, visit https://www.ato.gov.au/individuals-and-families/income-deductions-offsets-and-records/deductions-you-can-claim
Non-Deductible Car Expenses
Fines and Penalties
Unfortunately, under no circumstances can you claim fines, such as speeding or parking tickets, even if they were incurred during work related travel.
Vehicle Accessories and Modifications
Accessories and modifications must be made for business purposes to qualify as deductible expenses. For instance, adding a ute tray cover for work purposes can be claimed, but that rooftop tent you added for the weekend camping trip cannot.
For more information on deductible improvements and how to claim them, refer to the ATO guidelines.
Here’s some searches to help you with more info about business loans and deductions
- Business car loans
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- Electric vehicle tax deductions
- Home charger installation tax claim
Conclusion
Understanding and claiming all eligible car expenses can significantly impact your tax return so make sure you keep detailed records and receipts for all work-related car expenses. If in doubt, consult with a tax professional or refer to the comprehensive resources available on the ATO website.
By following these guidelines, you can maximise your tax deductions and potentially save a considerable amount on your tax return!