Claiming motor vehicle expenses

Claiming motor vehicle expenses in 2016

There is a change to the rules for claiming motor vehicle expenses that are work related in the 2016 tax return.  For a number of years we have had the option to choose between four methods of claiming these.

These were as follows:

The cents per kilometre method, which was restricted to a maximum of 5000 kilometre with three rates, depending on the engine capacity of the vehicle.  In the 2015 year the rate was 65 cents per km for engine capacity of 1.6L or less, 76 cents for capacities between 1.601 and 2.6L, and 77 cents for 2.601 and over.

The 12% of market value method which was useful for those doing over 5000 kms and who found it difficult to keep records of their running costs and, in most cases, was calculated at 12% of the purchase price of the vehicle.

There was the one third of actual car expenses.  These included fuel and oil, registration, insurance, repairs and maintenance, decline in value (depreciation) or lease payments and any other costs of running the vehicle.  Capital costs, like improvements to the car were not included.  Taxpayers needed to keep written evidence of all car expenses, except for fuel and oil costs which could either be estimated based on odometer records, or by keeping receipts.  There was no requirement for a log book under this method.

Finally there was the logbook method.  This could potentially result in the highest claim if the business portion was extremely high.  The requirement ids to keep a log of all trips the vehicle did for a period of twelve weeks, categorising each trip between business and non-business purposes.  By dividing the total of business kilometres by total kilometres one would arrive at a business use percentage.  There is also a need to keep records of all expenses during the year.  Again these include fuel and oil, registration, insurance, repairs and maintenance, decline in value (depreciation) or lease payments and any other costs of running the vehicle.  As above, capital costs, like improvements to the car are not included.  The same requirements for written evidence as with the one third of actual also apply except for fuel and oil.  The latter can be estimated based on odometer records, or by keeping receipts.  The main difference between this and the one third of actual is that the percentage calculated can be higher than the 33.3% which would arise as above.

The 12% method and one third of actual costs were not used by many tax payers, with the other two methods being used for most claims.  In view of this, the government has decided to no longer offer these in 2016 so we will be restricted to the log book method or the cents per kilometre still with the 5000km maximum, but with the standard rate of 66 cents per km for all claims, regardless of engine capacity.

This has been sold as simplifying the system but we do note that most vehicles in respect of which motor vehicle claims are made are above 1.6L, so there is a bit of a tax grab which the government is conveniently not drawing attention to!

Also Read: 2015/2016 Budget Considerations or Visit the ATO website for more information about claiming motor vehicle expenses in 2016