If you operate your business as a sole trader or a partnership that includes at least one individual, you can claim a:
• full deduction for a business-purpose vehicle – a truck or van, or a smaller vehicle, such as a ute, wagon or panel van that has been heavily modified for business use, or where private use is restricted to home-to-work travel and very minor other use
• vehicle expense deduction for a vehicle you own, lease or hire under a hire purchase agreement – for an ordinary car, station wagon or four-wheel drive, or for most other vehicles designed to carry less than one tonne or fewer than nine passengers.
The business can classify the following as business expenses: car registration and insurances, petrol and servicing costs and financing costs.
How much your business can claim, though, depends on the method you use. There are several ways to do this:
To maximise the amount of the car expenses you can claim for your business, you need to establish a business-use percentage — that is, the percentage that the car is used for work (versus personal use).
To do this, keep a logbook over a continuous 12-week period to substantiate the business kilometres travelled by the car. You need odometer readings for the start and end of the period that you owned the car or leased a car. Make sure you keep your receipts to justify any claims. The log is good for five years and then you will have to track it again.
It is this business percentage that you can claim of all the car maintenance expenses, including petrol, servicing, insurance, registration, and depreciation and financing on the cost of the car. There are 3 important things to note:
• Travelling from your home to your work place is not business travel.
• You must reimburse your business for the percentage of the car expenses that is for your private use, or your business may be subject to Fringe Benefits Tax (FBT).
• Your business can only claim the business-use percentage of the GST paid as a car expense.
There are two other, simpler methods you can use aside from keeping a logbook to claim car expenses. I If you travel less than 5,000 kilometres in a financial year, you can claim a set rate of cents per kilometre (business travel only) as an expense. The ATO sets the rate each financial year.
• If you travelled more than 5,000 kilometers then you can claim 12% of the cost of the car or 1/3 of car expenses.
The claim on depreciation of the car is limited — it’s currently capped at $57,466. If you purchase a car that costs more than this amount, the depreciation expense is capped.
Please note that this information provided is of a general nature for Australian business and should not be your only source. Circumstances vary from financial year to year so consult an experience tax agent.