Claiming Motor Vehicle Expenses

The ATO has recently confirmed that it will be increasing its focus on the deductions claimed by individual taxpayers. This is likely to mean that claims for car and other motor vehicle expenses will come under closer scrutiny than they have in previous years.

On top of this, the ATO has indicated that it will be also be looking closely at the FBT treatment of cars and other motor vehicles provided to employees as there are a range of issues that the ATO is concerned about.

Under the current rules an individual has the choice of claiming deductions for car expenses using either:

  • The cents per kilometre method; or
  • The log book method.

The taxpayer can only choose one method for all the car expenses for a particular car for a specific income year, but can choose different methods for the same car for different income tax years, and different methods for different cars for the same tax year.

If the individual has a motor vehicle that is not classified as a car, then the methods set out in Division 28 are not available. In this case the individual needs to claim a deduction for actual expenses incurred in the course of producing assessable income or in relation to their business activities. While a full log book may not be required, it is generally sensible for individuals to keep something resembling a log book to substantiate the deductions they are claiming.

As always, if you have any questions please just give our office a call.