We have been often asked by our clients on how they may claim motor vehicle expenses or how it works as this is a significant part of their deductions in relation to their business or work.
The two major methods with which taxpayers are able to claim the deductions are the set rate (cents per kilometre) method and the logbook method.
Set Rate Method
The set rate method is simple to use but you can only claim up to 5,000 business kilometres. Business kilometres is defined as the kilometres you travelled in relation to your business and/or work.
You can simply multiply the business kilometres and set rate according to your car’s engine capacity as follows.
? 0 – 1,600 63 cents
? 1,601 – 2,600 74 cents
? 2,601 and over 75 cents
For example, if you travelled 3,000 business kilometres during the year and you drive 2,500 cc motor vehicle, 3000 x 74 cents = $2220, so you can claim $2220 as a deduction for your car.
Logbook Method
On the other hand, if you use a logbook method, you can claim actual expenses as follows.
? Fuel and oil
? Repairs and maintenance
? Registration and insurance
? Interest on loan if any
? depreciation for the car
However, in order to use the logbook method, you need to maintain a logbook for at lease 12 consecutive weeks to find out your business use percentage.
For example if your logbook shows during the 12 weeks period, 70% is related to your work and/or business you can claim 70% of your actual expenses.
Depreciation
As for the depreciation, if you bought a luxury car (motor vehicle valued more than $57,466 for the 2011/12), the value from which the deprecation starts is limited to the luxury car threshold, which is $57,466 for the 2011/12.
For example if the price of the car is $70,000, the depreciation will start from $52,241 (net of GST) not from 63,636 (net of GST)
For more details, please contact us on 02 9858 2446.