Car expenses and the records you need to keep for the ATO in 2018
We recently wrote about home office claims being under scrutiny in 2018 here. However, that isn’t the only area the tax office is cracking down on. Thanks to the ATO’s improved technological capabilities and data matching tools, they can assess smaller client’s claims that were once too time consuming.
Motor vehicle use for business purposes is under heavy scrutiny in 2018. You may need to provide written evidence in the form of a log book when claiming expenses in your future income tax returns.
There are two methods in which you can record your car expenses.
The two methods are:
- Cents per kilometre – This is when your claim is based on a set rate and you can only claim a maximum of 5000km per year. You must be able to show your workings however you don’t need written evidence.
- Logbook – Your logbook must show the following:
- Date of when the business trip was taken
- Odometer Reading (the start and end of the trip)
- Kilometres travelled in total for each trip and;
- The reason for the journey
Regardless of your chosen method, both require the individual to know their business kilometres. Business kilometres are defined as “the kilometres you travelled in the car during earning assessable income (includes work-related activities).”
Examples of car trips you cannot claim include:
- minor work-related tasks that did not contribute to the majority of the trip. You will need to claim only the work-related leg of the trip,
- you were on call (i.e. a doctor who isn’t at work but “on call”),
- For other examples please refer to the ATO website.
Can you claim the depreciation of your car?
You can generally only claim a deduction for the decline in value of the car if you used a log book. If you only owned your car for part of the year, the deduction must be apportioned appropriately. Luxury cars may fall under different regulations.
Please note that the above regulations may be prone to change at any time and it is important to discuss any concerns with your accountant.
Aspect Accountants & Advisors offer personalised and industry specific plans and softwares, to keep your business running efficiently and effectively.
Speak with an Aspect advisor today via (08) 9227 9400.