CHANGES TO WORK-RELATED MOTOR VEHICLE EXPENSES DEDUCTIONS
In the 2015-2016 Federal Budget, the Government proposed substantial changes to an individual taxpayer’s option for claiming tax deductions for the use of a work-related motor vehicle.
– Cents per Kilometre
– 12 per cent of original value
– One-third of actual expenses
The proposed changes expected to take effect from 1 July 2015, will discontinue the 12 percent of original value and the one-third of actual expenses methods. This means a taxpayer will be able to claim a maximum deduction for up to 5,000 work-related kilometres based on a reasonable estimate or maintain a logbook for 12 weeks and claim actual expenses
based on a work-related use percentage.
*Change to Cents per Kilometre Method*
From 1 July 2015, the government has also proposed changes to the cents per kilometre calculation. The proposed change will see the three different rates for different engine sizes become irrelevant with the introduction of a flat rate of 68 cents per kilometre for all vehicles effective 1 July 2018.
This will impact those taxpayers with larger engine vehicles as follow;
Large Cars engine capacity more than 2600cc 77c per km will reduce to the flat rate of 66c per km reduction of 11c per km
Medium Cars engine capacity 1600 – 2600cc 76c per km will reduce to the flat rate of 66c per km reduction of 10c per km
Small Cars engine capacity less than 1600cc 65c per km will increase to the flat rate of 66c per km increase of 1c per km
*Medium and Large Car taxpayers will be disadvantaged *
*Log Book Method*
Given the abolishment of the above mentioned methods, together with the reduction of the rate per kilometre method, in order to maximise the deductibility of the usage of a work-related motor vehicle, we’reencouraging all individual taxpayers to consider transitioning to the Log Book Method.
This method can be used regardless of the kilometres travelled. The deduction is calculated by multiplying all expenses incurred, by the business percentage specified by maintaining a log book.
The log book must be kept for a 12 week continuous period and once completed, the percentage can be used for up to 5 income years before a new log book is required to be kept.
I would suggest you do this is as soon as possible as you may miss out the benefits in reducing your taxable income when preparing your 2016 Tax Return
So you must ensure you commence the log book no later than April 7th 2016
If you are interested in completing a log book to maximise your work-related motor vehicle deduction, and ensure you know precisely how you may be affected by these measures or record keeping requirements,please contact me as I have log book worksheet to assist you
Remember the kilometres must be Business and/or Work Related
When you can claim
You can claim a deduction for work-related car expenses if you use your own car in the course of performing your job as an employee, for example, to:
carry bulky tools or equipment
attend conferences or meetings
deliver items or collect supplies
travel between two separate places of employment (for example, when you have a second job)
travel from your normal workplace to an alternative workplace and back to your normal workplace or directly home
travel from your home to an alternative workplace and then to your normal workplace or directly home (for example, if you travel to a client’s premises)
perform itinerant work.
If you receive an allowance from your employer for car expenses, it is assessable income and the allowance must be included on your tax return. The amount of the allowance will usually be shown on your payment summary.
When you can’t claim
Most people can’t claim the cost of travel between home and work because this travel is private.
Owned or leased cars
You can claim a deduction for using a car that you owned, leased or hired under a hire-purchase agreement
You may not be considered to own or lease the car if your do not make financial contributions such as the initial purchase, lease, hire-purchase agreements, and loan or lease payments – even though you pay for expenses such as registration, insurance, maintenance or other running costs.
If you have a family or private arrangement where you are effectively the owner of the car, even if you are not the registered owner, we will treat the car as if you owned it and you can claim expenses.