While the Australian Taxation Office is certainly interested in making sure that you have paid all of the taxes that you are obligated to, it is also vital for your financial health to know what you can claim tax deductions on.
Work-related deductions are a particularly opaque concept. When it comes to your work tax deductions, the options are numerous and varied. One of the most significant components of these deductions, however, are related to car and travel expenses.
To give you the biggest refund this tax season, let’s look at some of the work-related car deductions that you may not realise you are entitled to.
Know If You Qualify
To ensure that you can benefit from tax deductions related to your work-related vehicle, it is important to ask yourself ‘what can I claim on tax?’. The Australian Taxation Office outlines that if you use your own vehicle for performing work-related duties, including a car that you lease or hire, then you can claim such a deduction. However, if only a segment of the travel involved was related to work, then you can only make claims related to these segments.
Importantly, the Australian Taxation Office defines a car as “a motor vehicle, excluding motorcycles and similar vehicles, designed to carry a load less than one tonne and fewer than nine passengers.” This includes many variants of four-wheel-drive vehicles.
Other Vehicles
If you use a different vehicle, other than a car as defined above, then you can potentially also make claims at tax time. This includes the use of motorcycles and vehicles with a carrying capacity larger than one tonne, or more than nine passengers.
You may also be able to claim deductions related to the use of someone else’s car if you have expenses related to work based on your travel in this vehicle. Check with your tax accountant to determine if you are eligible.
Keep Track Of Costs
It is imperative that you keep good records related to the specific expenses that you accrue when using a vehicle for work-related purposes. If you make such claims at tax time, the Australian Taxation Office will want to see well-documented proof of how these expenses were acquired. Keep all of your receipts related to fuel and oil purchases. If your vehicle is used for both private and professional purposes, then be sure to use a logbook to record the kilometres for each purpose.
Use The ATO Online Tool
Helpfully, the ATO provides a useful online calculator to determine your work-related car deductions. You can find this tool here. Make sure to treat this information as a general estimate, however. The actual amount that you receive in tax deductions may differ depending on your actual eligibility and your personal tax information.
Two Methods
There are two methods commonly used to determine the number of deductions that you are eligible for. These are the car logbook method, based on the number of kilometres you have driven for work-related purposes, or the cents per kilometre method. The former requires far more documentation, so the later may be preferred if you have trouble with staying organised. Consult the ATO website for more information.
Save Big By Collecting Your Tax Entitlements
Make sure to keep reliable records and claim your work-related tax deductions this year. While it may not seem like much, you are obligated to these tax deductions and they may represent a sizable sum over the course of the year.