Work Related Car Expense Claims Simplified


Work Related Car Expense Claims Simplified

Almost everyone has used their personal car for business purposes at some time in their career. The Tax Office reports that around seven million Australians makes these types of business claims each year. The rules about what you can claim as a business expenses might be confusing if you don’t know all the facts.

With over 11 billion in tax deductions, the new budget announcement indicates some changes are in the air. While the core of the deduction is not changing, the method of calculation is getting a makeover.

Currently there are four ways for taxpayers to take advantage of this deduction. They are:

  • Cents per kilometre

  • The logbook

  • 12% of original value

  • 1/3 actual expense

Those last two methods are only used less than 2% of the cases, so they are going to be discontinued under the new rules from 1 July 2015.  This will streamline the process and reduce overall compliance costs.

The Tax Office reports that 80% of vehicle claims use the cents per kilometre method. Small cars are 65 cents, medium cars are 76 cents and large cars are allowed 77 cents per kilometre.  There is a cap of 5,000 km per year across the board using this method.

According to the Motoring Association, the average running costs of the top five selling cars in Australia is approximately 66 cents per kilometre. This is going to be the set amount under the new rules for any size car.

Those who drive small cars will see a slight increase in their deductible amount and those that drive larger cars will see a decrease. For instance, a person driving a 2.5 litre sedan can currently claim at the 76 cents rate, but under the new rule will only be able to claim 66 cents per km.  If they use their car for business and drive 1000km, the current law would give them a $760 deduction, where the new rules would only allow for $660.

The Tax Office indicates that on average it will only mean a loss of $85 per year per claim. That seems minimal, but will result in an overall budget savings of around $845 million projected forward.

However, taxpayers can still use the logbook method.

When you break it down it’s not too confusing after all. Hillyer Riches tax agents & accountants are here to answer any questions you may have about travel expenses, work related deductions or any other tax issue. Our local office in Caulfield is convenient and our accountants are accessible.



Hillyer Riches Management Pty Ltd is a Corporate Authorised Representative (No 466483) of Capstone Financial Planning Pty Ltd. ABN 24 093 733 969. AFSL / ACL No. 223135.This document contains general advice only and is not personal financial or investment advice. Also, changes in legislation may occur frequently. We recommend that our formal advice be obtained before acting on the basis of this information.

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