The topic discussed here is the use of the One Third of Actual Expenses Method, which is one of four methods allowed by the Australian Taxation Office for calculating and claiming motor vehicle deductions. To view the list of vehicle deductions available, please visit the ATO website at http://www.ato.gov.au/individuals/content.aspx?doc=/content/00313836.htm&pc=001/002/076/001/002&mnu=0&mfp=&st=&cy=
The one third of actual expenses method is just as it sounds (and does not take in purchase price or include capital costs such as improvements to the vehicle). The ATO will still need you to have receipts for fuel and oil costs, or use the odometer records to calculate a reasonable estimate. All other car expenses need to be recorded, as will the make and model, engine capacity and registration number. You can travel more than 5,000 kilometres, but may need to show how you worked these business kilometres out.
The vehicle that you, or your business, owns needs to meet the following conditions are met:
- You owned or leased a car, station wagon or four wheel drive;
- Your vehicle doesn’t have a carrying capacity of more than 1 tonne (e.g. a ute or panel van);
- Your vehicle doesn’t have a carrying capacity of nine passengers or more; and,
- Your vehicle is not a motor cycle.
Keep in mind that if you are trying to calculate a deduction as an employee the vehicle has to be owned or leased by you, and not owned by a business that is simply making a vehicle available to you for use at work. However in some cases you might be entitled to a claim if there is a private arrangement between family members or partners to share the use of their vehicle.
You’ll also need to prove that the car was for eligible business or work purposes. A claim will be allowed if you had to travel from your home to your workplace and:
- You used your car because you had to carry bulky tools or equipment that you used for work and could not leave at your workplace (for example, an extension ladder or cello)
- Your home was a base of employment (that is, you started your work at home and travelled to a workplace to continue your work for the same employer)
- You had shifting places of employment (that is, you regularly worked at more than one site each day before returning home).
Please note that you must have travelled more than 5,000 business kms to be eligible for this method.
In instances where you have more than one place of work, a claim is also possible under the following circumstances where travel was:
- Between two separate places of employment (for example, when you have a second job)
- From your normal workplace to an alternative workplace while you are still on duty and back to your normal workplace or directly home
- 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 to work there for the day).
Keep in mind, however, that some trips are not allowed when calculating your motor vehicle deduction. The ATO have cited the following examples of activities that are not eligible for claiming a deduction:
- You did minor work-related tasks at home or between home and your workplace
- You travelled between your home and workplace more than once a day
- You were on call
- There was no public transport near work
- You worked outside normal business hours
- Your home was a place where you ran your own business and you travelled directly to a place of employment where you worked for somebody else.
Calculating your claim
To calculate your claim to One Third of Actual Expenses method, apply the following steps:
If you owned or leased the car for part of the year, you will need to work out whether you can use this method. Firstly, work out the number of kilometres travelled and multiply that number by 366. Then divide this amount by the number of days you had the car during the year. If your answer is more than 5,000 km you can use this method.
Add up your total expenses for fuel and oil, registration, insurance, loan interest, repairs and maintenance, the decline in value or lease payments and any other costs of running your car. Work out the amount to show here for decline in value.
Divide the total expenses by 3.
Write the amount at A item D1. Print the code letter O in the CLAIM TYPE box beside the amount on your tax return.
- “Car expenses” taxpayersassociation.com.au. Taxpayers Australia INC. Retrieved 12 May 2013.
- “Car and travel expenses 2012″ ato.gov.au. Australian Taxation Office. Retrieved 12 May 2013.
- “D1 – Work related car expenses 2012″ ato.gov.au. Australian Taxation Office. Retrieved 12 May 2013.
- “Luxury Cars and LCT Threshold” ato.gov.au. Australian Taxation Office. Retrieved 12 May 2013.