Australians are being warned about a common tax deduction that is on the Australian Taxation Office’s (ATO) hit list this year. Millions of Australians who use their cars for work may be able to claim up to $4,250 without keeping a logbook, but they will still have to prove the deduction.
Jenny Theodore, founder of Eire Consulting, said: Yahoo Finance She said she had seen many people claiming 5,000 kilometres of work-related car expenses on their tax return this year without providing any evidence. The accountant and registered tax adviser said that this could get you into trouble.
“It is surprising to see this this year as improper deductions for car expenses are one of the areas the ATO focuses on,” Theodore said.
RELATED
“People think it’s one of those things you can claim without receipts or detailed documentation, but that’s not really the case. You still need documentation to prove you’ve driven 5,000 kilometers if you claim that.”
If you use your car for business purposes, you can use the “cents per kilometer method” or the “logbook method” to deduct work-related car costs.
Using the cents-per-kilometre method, you can claim up to 5,000 work-related kilometres. This covers all car costs, says the ATO, including the vehicle’s depreciation, registration, insurance, maintenance, repairs and fuel costs.
Have a tax story to share with us? Contact [email protected]
For 2023-24, you can claim 85 cents per mile, or a total deduction of up to $4,250, using this method.
Theodore said the logbook method is better for people who travel a lot for work and would “absolutely” give them a better deduction, but the records required are more burdensome.
“It’s about keeping 12 weeks of travel records for all travel that is not just work-related. It’s quite a lot of hassle for people and they just don’t do it,” she said.
Which car costs can I claim?
You can only claim the costs of work-related journeys. This includes journeys between workplaces or to carry out your professional duties, but not journeys between your home and workplace.
Theodore said it was a common misconception that people could claim travel between work and home.
“Any travel to and from work is considered personal or private in nature and cannot be claimed as a tax deduction,” she said Yahoo Finance.
“Travel is actually only tax deductible if you are commuting between jobs or in the office for client meetings or similar.”
According to the ATO, more than three million taxpayers claimed a deduction for car expenses in 2023.
What documents do I need?
Cents per kilometer method
A logbook is not required, but the calculation of the kilometers traveled for work purposes must be proven.
For example, the ATO said you could record your work-related journeys in a diary or use the “myDeductions” tool in the ATO app.
“The ATO will expect a record in some form, be it an Excel spreadsheet or extracts from your calendar or diary, showing that you actually made those business trips over the course of the year to achieve those 5,000 kilometres or whatever,” Theodore said.
“There is definitely less burdensome documentation required, but it is still not a given that you will be able to submit it. If you are ever audited or examined by the ATO, they will look at how you arrived at that claim.”
Logbook method
The logbook must record your journeys over a continuous period of at least 12 weeks. You must state the destination and purpose of each journey, the mileage at the start and end of each journey and the total kilometres driven during the period.
You must also provide the odometer readings for the start and end of the logbook period, as well as the values for the start and end of the tax year in which you use the logbook. Logbooks are valid for up to five years.
Theodore said it’s always a good idea to keep more detailed records than you think necessary, just in case.
“The more documentation you have, the higher your deduction, so it’s worth it in the long run,” she said.
Get the latest Yahoo Finance news – follow us on on facebook., LinkedIn And Instagram.
