Whether my client is a Sole Trader, Partnership or Company, the recurring questions I am frequently asked are regarding motor vehicles expenses and how they can be claimed.
Claiming motor vehicle expenses is a very important part of any business. This article will help break down what vehicles to claim and methods to claim motor vehicles within your business.
If you have a company or trust-owned vehicle, you can claim a full deduction on any of the vehicles operating expenses. However, if the vehicle is also used for private use, the company or trust may have to pay Fringe Benefits Tax (FBT).
Partnerships and Sole Traders who have an ATO classified business purpose vehicle can claim 100% of vehicle costs without accounting for private use.
Partnerships and Sole Traders who have an ATO classified business purpose vehicle can claim 100% of vehicle costs without accounting for private use.
Sole traders who use their own car for business purposes and do not travel over 5,000 kilometres for business use have two choices
use a logbook; or
use the cents per kilometre method.
For people who travel more than 5,000 kilometres for business purposes, you have 4 options
use the logbook method,
use the cents per kilometres (up to 5,000km),
12% of original value method; or
use one-third of the actual expenses method and claim a third of your car expenses.
To apply any of these methods, you must:
Have records of your expenses
Record the vehicle's odometer before and after use
Record the vehicle's make, model and engine capacity
Record the vehicle's registration number
It's important to keep in mind you can choose different methods for different vehicles and can change these methods yearly. To ensure you get the greatest outcome for your business, you can choose whichever method suits your needs best.
The ATO has a fact sheet of dos and don'ts that can be found here.
This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own legal advisor, business advisor, or tax advisor with respect to matters referenced in this post. Bluechip Solutions Bookkeeping assumes no liability for actions taken in reliance upon the information contained herein.