How to Claim Car Expenses and Make the Rules Work For You

Did you know you can earn some extra cash by claiming your car expenses at tax time? Depending on the business mileage you cover, you can claim over $10k back on your taxes for your car expenses. Epic, right?

We know the workings of the ATO rules that can get you a maximum tax deduction and by the end of this article, you’ll know them too.

Buckle up and get ready for some solid starting points towards a bigger tax refund in the 2024 income year. Read on and learn how to make the rules work for you.

Gain Control Over Your Tax Return: Learn the ATO Rules

Any discussion on the topic of car expenses usually brings on a torrent of questions.

You may be curious about how many kilometres you can claim without a logbook. Or perhaps you’re interested in learning how to work out the split of your work use versus personal use.

Now, if you’re looking to maximise your tax return, you’ll need some answers ASAP. So, let’s tackle the most important ones.

You’re entitled to claim a deduction for your car expenses if:

• You use your car to generate income
• You’re the registered car owner
• You can support your claim by keeping records of your work-related car expenses

Speaking of record-keeping, there are two ways to go about it – the cents per kilometre and the logbook method.

Is complex record-keeping the number one reason you don’t claim your ATO motor vehicle expenses? Then the cents per kilometre method is a great option for you.

It’s true that you won’t be hard-pressed to keep a 12-week driver’s log as required under the logbook method.

You should know, however, this doesn’t get you off the hook completely. You’re still required to substantiate your mileage by keeping a diary of your business-related trips if you’re making your claim using the cents per kilometre method.

The amount of record-keeping is directly proportional to the amount you can claim. The cents per kilometre method limits your claim to 5,000 business kilometres. The logbook method allows you to cross this limit and claim the business part of all your car expenses.

Still having doubts about which method to choose? Read our article dedicated to this topic.

Make Sure Your Claim Is Accepted by the ATO

Knowing what you need to claim and other related rules will set you off to a good start when it comes to claiming your car deductions. Don’t do anything that will lend colour to possible ATO allegations, and you’ll stay on the right side of the law.

Making generous tax return guesses can backfire on you. The ATO won’t be timid about reassessing your claim. They’re fine-tuning their audits, making it next-to-impossible to escape their strict scrutiny.

Yet finally, there are honest ways to fight your way to a bigger tax refund. Choose the method that best suits your circumstances and log all trips that qualify as a business expense.

Beyond that, learn how to avoid common claim mistakes and you’ll be on your way to a handsome tax deduction.

“We see taxpayers claiming for things like private trips, trips they didn’t make, and car expenses their employer paid for or reimbursed them for.” – Source: News.com.au

Here are the biggest car expense no-no’s. Never claim expenses:

• For travel between home and work (there are some exceptions when working from a home office and carrying bulky tools)
• If you were previously reimbursed for them (possibly by an employer)
• If you drive a company car on a novated lease
• If they have been salary sacrificed

Got these rules all figured out? Great! Now, learn what counts as business mileage and you’re all set to claim your tax deduction the right way.

Claim Your Motor Vehicle Depreciation

Now, how about you monetise your car depreciation? Decide upon the logbook method and you’ll be free to claim beyond just fuel and oil expenses.

Think of how much you spend on your lease payments or the interest on your motor vehicle loan. These expenses are also tax-deductible under the logbook method!

Yet perhaps one of the largest costs of operating a car is vehicle depreciation.

So, why wouldn’t you claim what’s yours and save thousands of dollars on your tax return?

You can claim depreciation only for the business-use percentage of the value of your car. Nonetheless, it’s still a decent figure.

Once again, you have two methods to choose between:

• Simplified depreciation rules. You calculate your deduction by adding your car costs to the small business pool.
• General depreciation rules. You claim a deduction over the effective life of the asset.

The ATO car limit restricts your claim to a certain point, however. To work out your car depreciation deduction, use the car limit for the year in which you first used your car for work.

Need some help with calculating your car depreciation rate? Look for a registered tax practitioner on the online ATO’s Tax Practitioner’s Board.

Claim Your Car Purchase as a Business Expense

But wait, there’s more! If you run a small business and your profit margins are within $10-50 million, we have some good news for you:

You can claim your car purchase as a business expense. Now, what beats that?

And there’s more! You can claim your car purchase cost immediately, in the running fiscal year. This tax break is known as the instant asset write-off.

To tap into this gold mine of tax deductions, you only need to meet a few conditions:

• Your car cost needs to fall below the threshold amount of $30,000.
• You must use the asset (in this case a car) in the running fiscal year.

Note that buying a car is tax-deductible only if your car purchase price falls below the price thresholds listed in the table below.

Capitalise on Technology: Use a Logbook App to Claim Your Car Expenses

The tips above will hopefully give you something to chew over. We could go on about the ATO rules but would rather not chip away at any more of your valuable time. Now you know them, make them work for you.

A lucrative tax return has never been easier to claim than it is today in the computer age we live in.

Nothing can provide as handy a shortcut to your tax deduction claim as a good car logbook app. It can help keep your taxes on track and do pretty much all the work for you.

This is where GOFAR comes in. It’s an Australian-made logbook app that helps you claim your car expenses with confidence.

Having a reliable app to rely on saves you a lot of money come tax time. But the GOFAR app boasts some more useful features that can save you a lot of time as well.

Some of those features are:

• Automatic trip logging. The set-and-forget adaptor that comes with the GOFAR app will neatly log all of your trips. You don’t even have to remember to start the app, the adaptor will start tracking the trips on its own.
• Simple trip classification. Categorising your trips as business or personal has never been easier – all you need to do is swipe left or right.
• ATO-compliant reports. View your claim totals and send compliant reports to your tax office agent with the click of a button.
• Choose the most lucrative logbook period. Pick the logbook window that will allow you to get your maximum tax return.

So, what do you do next? Tie in the know-how you’ve just gained with the helpful technology available and make the rules work to your advantage. Get GOFAR today and file your tax return the clever way this income year.