Claiming car-related expenses as tax deductions might seem like the easiest way to get a larger return - but it’s also one of the most carefully monitored. Here are a few tips on what you need to watch out for when claiming car-related deductions.
Claiming the cost of your commute
There are specific rules around travel to and from work when it comes to tax deductions. Your work commute expenses, such as public transport and travel by car, are not covered as a tax deduction.
Claiming expenses that can’t be backed up
One of the most common mistakes that car owners can make is claiming car costs using the ATO’s ‘cents per kilometre’ method without the receipts and paperwork to back it up. Keeping accurate and tax-compliant logbooks is essential, with both businesses and employees having to be able to prove their vehicle-related claims if asked by the ATO. Any impacts of COVID-19 that have adjusted the driving patterns of individuals should also be reflected in the vehicle logbook.
Depreciation is an accounting method of allocating the cost of a tangible or physical asset over its useful life or life expectancy. If you rented your car out on a share economy platform or used it for work, speak to us to avoid any complications with trying to work out the depreciation of your asset.