With the cost of petrol these days, anything you can do to reduce the cost of motoring is welcome.
Significantly, if you use your own car to help you earn taxable income (as part of your job, for instance), you can claim a tax deduction for any costs which you incur, including the cost of petrol but also additional costs such as insurance, servicing, repairs and so on.
There are two ways you can make this claim:
- Cents per kilometre. You can claim a flat rate of 66c per kilometre for every business kilometre you cover. You’ll need to keep a diary of all work-related journeys so you can work out how many kilometres you’ve travelled for work. This method can only be used for claims up to 5000km per vehicle.Tip: if you change your car part way through the year, you can claim 5000km for both vehicles.
Generally, if you travel more than 5000km per year in a particular vehicle, you’ll need to use the logbook method (below).
- Logbook. This is a way of claiming the actual expenses you’ve incurred in running your vehicle for work, such as fuel, servicing, insurance and depreciation. Deduction claims usually work out larger using the logbook method but the record-keeping requirements are more onerous. For a start, you’ll need to keep a logbook – but only for a representative twelve week period. In the logbook, you’ll exhaustively record all your journeys – business and private – so that at the end of the logbook period, you can work out the proportion of business use for your vehicle. That proportion can then be applied to all your car expenses over the year (and over the next four years too since, once you’ve done it, the logbook is good for five years). Then, you’ll need to keep records, such as receipts or invoices, for everything you spend on your motor vehicle, so you can claim the appropriate business percentage of that expense when you come to complete your tax return. So, don’t throw away your petrol receipts!
So, that’s how to make a claim. But when are you entitled to make a claim?
Driving as part of your job
If you’re required to use your car for work, you are entitled to a deduction for the costs which you incur whilst at work.
This specifically excludes the cost of the commute from home to work, except in very limited circumstances, since this is regarded as private expenditure.
The only exception to that rule is if you are required by your employer to carry bulky tools in your vehicle which cannot be safely secured at work.
Take great care on that point – the ATO looks very closely at such claims and disallows lots of them.
Typical situations where you might be able to claim petrol costs whilst at work include:
- Travelling between workplace sites during the working day
- Travelling directly from one job to another where you have a second job (provided you don’t go home first)
- Travelling to a business related meeting with a client, supplier or prospect
- Travelling to a work-related course.
Driving as part of your business
If you run your own business, you can claim a deduction for the cost of using your car in the business. The rules are very similar to those that apply if you use your car as part of your employment. The significant difference is that if you run your business from home, your work-related journeys will be regarded as starting from home.
Owning an investment property
If you own a rental property and need to visit the property to undertake inspections or repairs, the cost of travelling from your home to the investment property is claimable.
That includes the cost of petrol if you choose to drive. If there’s an element of private travel involved in the trip (for instance, if your rental property is by the beach and you combine a property inspection with a holiday), you will need to apportion the cost between the deductible part (the property visit) and the private element (the holiday).
Getting your tax return done
If you use a tax agent to prepare your tax return, as well as claiming the cost of getting the tax return prepared, you can also make a claim for any travel expenses you incur in getting to and from your tax agent, including petrol if you drive to see your agent.
No matter whether you’re driving for work, to visit an investment property or to get your tax done, you need to use either the cents per kilometre method or the logbook method. Whichever method you choose needs to be applied to all your tax deductible car use and if you choose the cents per kilometre method, the 5000km limit applies to all tax deductible use.