How to calculate you motor vehicle expenses

The Cents per kilometre and Logbook Methods

One of the most common topics we are asked about at tax time is in relation to purchasing motor vehicles and claiming motor vehicle expenses. We have provided below a brief summary of the tax and GST rules in relation to motor vehicles.

The ATO allows two methods for calculating motor vehicle expenses from 1 July 2015, being the Cents per kilometre method and the Logbook method.

    1. The Cents per kilometre method enables you to claim up to 5,000 business kilometres per car at a flat rate of 66 cents per kilometre. The deduction is based on a reasonable estimate of business kilometres travelled and you are not required to maintain substantiation documents. The maximum claim is 5,000 business kilometres, which equates to a maximum tax deduction of $3,300.

 

  1. The Logbook method allows you to use a business-use percentage which is determined by keeping a compliant logbook for a period of at least 12 continuous weeks. This method can be used if you travel more than 5,000 business kilometres in a financial year. The business-use percentage is applied to all motor vehicle expenses including fuel, insurance, registration, repairs and depreciation e.g. if your business percentage is 75% then you will receive a tax deduction for 75% of the motor vehicle expenses incurred. When using the logbook method all expenses must be verified with written evidence.

The GST treatment on motor vehicle expenses will differ based on the method used. The cents per kilometre method allows you to claim up to 33.3% of the GST paid if you travel more than 5,000 business kilometres or a lower set percentage if you travel less than 5,000 business kilometres. The logbook method allows you to claim GST based on your business-use percentage.

Depreciation that can be claimed on the purchase of a motor vehicle is capped at $57,581 for the 2016/17 financial year. The maximum GST that can be claimed on a motor vehicle above this limit is 1/11th of $57,581 being $5,234. If you purchase a car for $77,000 which includes GST of $7,000 the maximum GST you can claim is $5,234. The GST will need to be reduced by any private use based on the method used to calculate motor vehicle expenses.

If you need assistance in calculating your motor vehicles for tax purposes or any other financial matter, please contact Rebecca Zuromski, Health Services Manager at William Buck on (08) 8409 4333 or by email rebecca.zuromski@williambuck.com.

To keep track of your motor vehicle usage our Tax Rates & Tools App has a GPS powered logbook feature, or if you would prefer a physical copy click here for a printable logbook.
Disclaimer: The contents of this article are in the nature of general comments only, and are not to be used, relied or acted upon without seeking further professional advice.  William Buck accepts no liability for errors or omissions, or for any loss or damage suffered as a result of any person acting without such advice.  Liability limited by a scheme approved under Professional Standards Legislation.