Changes to Motor Vehicle Expense Substantiation

Since the commencement of motor vehicle expense substantiation, taxpayers have had four methods by which they could substantiate their car expense deductions:

  1. Cents per kilometre method
  2. 12% of original value method
  3. 1/3 of actual expense method
  4. Log book method

As of 1 July 2015, the “12% of original value method” and “one third of actual expense method” has been withdrawn. This leaves the “cents per kilometre” and the “log book” method available to substantiate car expenses and be able to claim a deduction.

Workplace Motor Vehicle Expenses
It should be notes that there is no change to claiming deductions for “work” vehicles. Claims for work related use of vehicles such as vans and utilities with a carrying capacity of at least one tonne will not be effected by these changes.

Cents per Kilometre
The “cents per kilometre method” is limited to a maximum of 5,000 kilometres per year. Any taxpayer who travels more than 5,000 kilometres in a financial year could be financial disadvantaged if they do not have a compliant log book for the financial year ended 30 June 2016.

Guidelines to ensure your log book is compliant
To have a compliant log book, the following steps must be adhered to;

  • A log book must be kept for the first income year when a claim is made for a car and it must be maintained for a continuous 12 week period.
  • The log book must record all business journeys made in the car for the 12 week period. For each journey the following must be recorded:
  1. The date the journey began and ended
  2. The total kilometres travelled on the journey
  3. The purpose of the journey (i.e. business or private)
  4. The total number of business kilometres travelled
  • If claims are to be made using the log book method for two or more cars in a particular business, the log books must cover the same 12 week period.
  • Once a log book has been maintained for a 12 week period, the next subsequent log book is only required to be completed after 5 years.

We urge all taxpayers to discuss the motor car substantiation options with their accountant, as each taxpayer’s circumstances are different.

Should you have any queries or would like more information, please contact the Geraldton office on 9920 7400.