Is your vehicle tax deductible? | Mobbs & Co Accountants

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Getting the best deductions for your vehicle

Finding every possible deduction is vital when you run a business. One of the major deductions to look out for is vehicle deductions. If you own a fleet you will know that they are expensive to run so every dollar you can get back is a good thing.

When it comes to work vehicles, knowing exactly what is and isn’t deductible can be a little confusing. Take a look at taxable work vehicles and what you can and can’t claim.

Types of vehicles

To start with, you need to understand what the ATO qualifies as a ”vehicle”. According to the ATO there are two types of vehicles, “cars” and “other vehicles”.

  • Cars: Any vehicle that carries a load less than a tonne and accommodates less than nine passengers.
  • Other vehicles: Motorcycles and any vehicle that carries more than a tonne and/or more than nine passengers.

A four-wheel drive, for instance, is a “car”. “Other vehicles” would include minivans that seat more than nine passengers.

For the individual

The ATO lists the rules for individuals when it comes to vehicle benefits here.

In short, if you own, hire, or lease a vehicle yourself you can claim some expenses if you also use it for work.

You can claim expenses if you use your personal car to:

  • Travel for work including to conferences
  • Deliver or drop off work related items or supplies
  • Travel for work anywhere outside of your regular commute

You can’t claim your regular travel to or from work. You also can’t claim if your car is paid for under salary sacrifice or novated lease. And you can’t claim if your employer has already reimbursed you for your vehicle expenses.

For the business owner

The Australian Tax Office allows you to claim deductions for vehicles that your business owns, leases, or has a hire-purchase agreement for. Eligible deductions include:

  • Fuel
  • Insurance
  • Repairs
  • Interest on loan repayments
  • Lease payments
  • Registration
  • Depreciation

Business structure

The way that you claim deductions can differ, depending on your business structure.

  • Sole traders and partnerships: Can only claim expenses incurred in the everyday running of your business. You must calculate deductions differently depending on the type of vehicle.
  • Companies and trusts: Can also only claim the expenses related to the everyday running of the business. They cannot use the logbook or cents per litre method. Companies and trusts have to provide receipts to calculate actual costs.

Record keeping

The ATO recommends keeping the following records so you can make accurate claims against the cost of owning and operating a vehicle:

  • Kilometres travelled for business and private use
  • Receipts for fuel, repairs, services, and insurance
  • All loan or lease documents
  • All tax invoices
  • The registration papers for all vehicles

You are also required to show details of how you calculated your claim. Sole traders and partnerships also have to keep extra logbook related records.

The ATO also advises keeping all records for five years.

For a more in depth look at all the ATO’s requirements and rules check out their handy infographic.

Incentives

NSW has also been introducing deductions for making your fleet electric. According to Drive.com.au, as of September 1st, 2021, the NSW government will be offering a $3,000 rebate. They will also be offering free stamp duty.

In Queensland, the main benefit is reduced stamp duty, although this is a rapidly evolving situation as more incentives to encourage the uptake of electric vehicles are considered.

Still confused? Knowing what you can and can’t claim is very difficult. Leave it up to a tax accountant who understands all the details and can help you to minimise your tax bill.

Contact Mobbs & Co today to get the most out of your vehicle deductions.


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