Fuel Your Savings: Guide to Claiming Car Expenses Effectively

If you’re using your car for work-related journeys beyond your daily commute, you have an excellent opportunity to maximize your tax return by claiming car expenses. This common deduction is straightforward to claim correctly, and can significantly boost your tax refund.

Maximising Your Car Expense Deductions

The Australian Taxation Office (ATO) allows you to claim car expenses if you:

• Undertake work-related journeys during the day or night.
• Attend conferences or meetings outside your usual place of work.
• Travel between two places of employment (excluding home).
• Drive from your workplace to a different workplace and back.
• Regularly work at multiple sites each day, requiring travel between them.
• Carry bulky or heavy tools that can’t be safely stored at your workplace (excluding items like laptops or stationery).

When Car Expenses Aren’t Deductible

There are instances where you can’t claim car expenses, even if you feel they should be deductible:

• Travel between home and work, regardless of the distance.
• Car expenses that your employer reimburses.

Choosing the Best Method to Claim Car Expenses

Deciding between the Cents Per Kilometer method and the Logbook method depends on your specific circumstances and the extent of your work-related car use.

Cents Per Kilometer Method

This method is efficient for those who want to keep things simple. Here’s how it works:

• You can claim up to 5000 km per year without needing a logbook.
• You just need to be able to explain how you calculated your claim and its work-related nature.

Rates per Kilometer (km)

• 2023-24: 85 cents/km
• 2022-23: 78 cents/km
• 2021-22 and 2020-21: 72 cents/km
• 2019-20 and 2018-19: 68 cents/km
• 2017-18 and 2016-17: 66 cents/km

Example: Imagine you’re a senior executive who frequently drives for work-related tasks. In the 2023/24 tax year, you drive 3,000 km for these purposes.

• 3,000 km x $0.85 = $2,550

This method covers all car-related expenses, including insurance, registration, repairs, maintenance, and fuel. It’s straightforward and requires minimal record-keeping. 

Logbook Method

If your work-related car use is substantial, the logbook method might be more advantageous:

• Maintain a logbook for 12 continuous weeks.
• Your logbook remains valid for five years unless your usage pattern changes.
• Record both business and personal trips and keep receipts for all car-related expenses (petrol, registration, insurance, servicing, loan interest, depreciation, other running costs).

Example: You’re a director using your car extensively for business. Over 12 weeks, you log 1,000 km, with 850 km being work-related. This gives you an 85% work-use percentage.

Your annual car expenses total $10,000:

• $10,000 x 85% = $8,500

You can claim $8,500 in car expenses, significantly lowering your taxable income. 

Practical Tips:

1. Plan Ahead: If you anticipate high work-related car use, start maintaining a logbook early. Consistent and detailed records will make your claims more robust.
2. Keep Receipts: For the logbook method, store all receipts related to your car expenses. Digital copies are acceptable and can be more convenient.
3. Consult a Professional: Aero Accounting Group specializes in navigating these complexities to ensure you’re claiming the maximum deductions available to you.
4. Review Annually: Even if your logbook is valid for five years, review your work-related car use annually to ensure it remains consistent with your logged percentage.

Take Action and Optimise Your Deductions

Claiming car expenses correctly can lead to significant savings at tax time. Whether you choose the simple Cents Per Kilometer method or the detailed Logbook method, ensure your records are thorough and up-to-date. These deductions can be substantial, making it well worth the effort to get it right.

Feel empowered and confident in maximizing your deductions. Contact Aero Accounting Group today at www.aerogroup.com.au  to discuss how we can help you navigate your car expense claims effectively and optimize your tax returns.