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TAX TIPS: Motor Vehicle Claims

TAX TIPS: Motor Vehicle Claims

Written by: 
Evan Lowenstein

Motor Vehicle Claims to be scrutinized by the ATO

The ATO has announced that it will be closely examining claims for work-related car expenses this tax time as part of a broader focus on work-related expenses.

The ATO is particularly concerned about taxpayers claiming for things they are not entitled to, such as private trips, trips they didn’t make and car expenses that their employer paid for or reimbursed.

Assistant Commissioner, Kath Anderson, said more than 3.75 million people made a work-related car expense claim in 2016-17, totalling about $8.8 billion. Each year approximately 870,000 people claimed the maximum amount under the cents-per-kilometre. The ATO is concerned that some taxpayers mistakenly believe that this is a “standard” deduction they are entitled to, without needing to provide any evidence of having travelled that distance or even having undertaken any travel at all.

The tax law makes it clear that there are two methods to claim car expenses: a rate per km method and the log book method.

Rate per km method

As far as the rate per km method goes, the Commissioner is prepared to accept that a careful and reasonable estimate of the business trips taken will be sufficient evidence.

This method has the km amount capped at 5,000 kms at a rate of 68 cents per km.

Log book method

As far as a log book method goes, the record keeping requirements are more onerous because a log book has to be kept for a continuous period of 12 weeks every 5 years and all receipts for registration, repairs, insurance etc must be kept. However, there is an exception for petrol receipts, where there is no need to keep those because an estimate is sufficient.

The Assistant Commissioner said that the ATO’s ability to identify unusual claims has improved due to enhancements in technology and data analytics.

In previous issues of the Newsletter, Lowensteins has reminded you about the increased scrutiny by the ATO.

Whichever method you adopt to claim car expenses, the increased level of record keeping is essential.

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