What vehicle expenses can your business claim?

24th February, 2017

Does your business own a car that you use for work that’s registered in the name of your business? Then you’ll want to know what expenses you can claim.

Your business can classify the following as business expenses: car registration and insurances, petrol and servicing costs (even car washes to keep it looking pretty!) and financing costs.

How much your business can claim, though, depends on the method you use. There are several ways to do this:

1. Logbook method

To maximise the amount of the car expenses you can claim for your business, you need to establish a business-use percentage — that is, the percentage that the car is used for work (versus personal use).

To do this, keep a logbook over a continuous 12-week period to substantiate the business kilometers traveled by the car.

The log is good for five years, and then you will have to track it again.

It is this business percentage that you can claim of all the car maintenance expenses, including petrol, servicing, insurance, registration, and depreciation and financing on the cost of the car.

There are 3 important things to note:

  • Traveling from your home to your work place is not business travel.
  • You must reimburse your business for the percentage of the car expenses that is for your private use, or your business may be subject to Fringe Benefits Tax (FBT).
  • Your business can only claim the business-use percentage of the GST paid as a car expense.

READ: GST Reimbursements And Credits: The Complete Guide

2. Kilometres method

There are two other, simpler methods you can use aside from keeping a logbook to claim car expenses.

  • If you travel less than 5,000 kilometers in a financial year, you can claim a set rate of cents per kilometer (business travel only) as an expense. The ATO sets the rate each financial year.
  • If you travelled more than 5,000 kilometers then you can claim 12% of the cost of the car or 1/3 of car expenses.

Depreciation claims

The claim on depreciation of the car is limited — it’s currently capped at $57,466.

If you purchase a car that costs more than this amount, the depreciation expense is capped.

Note that in the 2013 financial year, you have the ability to claim the first $5000 of the cost of a car purchased for business as a 100% tax deduction.

You also can claim accelerated depreciation on the balance of the cost of the car. It’s a flat 15% in the first year the car is held, then 30% each year after.

What about fuel tax credits?

According to the Australian Taxation Office (ATO), fuel tax credits provide you with a credit for the fuel tax (excise or customs duty) included in the price of fuel you use for your business activities in:

  • machinery
  • plant
  • equipment
  • heavy vehicles

Fuel tax credits are claimed in the Business Activity Statement (BAS).

You need to be registered for GST and for the fuel tax credit to claim this benefit.

There’s a very useful checklist from the Australian Taxation Office (ATO) that you can refer, to help assess your eligibility for fuel credits and claiming them.

The site also has an online calculator you can use each time you need to complete your BAS.

It’s important to meet all your tax and compliance obligations this EOFY.

Check out MYOB’s Tax Changes Information section, meant to help startups and small businesses stay on top of their game with tax changes.

READ: Instant write-off for small business assets under $20,000: how does it work?

The information provided here is of a general nature for Australia and should not be your only source of information. Please consult an experienced tax agent as each small business’ circumstance will vary for end of financial year.