Mr Taxman
Change the way you feel about taxes.
Get informed and discover what the taxman doesn't want you to know.
Sharing it with Australia, Mr Taxman is a regular Woman’s Day columist and TV finance commentator
  • click to visit Mr Taxman on Twitter
  • click to visit Mr Taxman on FaceBook
  • rss

Tips for deducting work-related car expenses

Jul 31, 2014

Do you drive for work purposes? Although in most cases you can't claim the expense of your daily commute on your taxes, if you use the car while performing your work duties you may have a valid deduction. It's worth taking a closer look at how and when you can deduct car-related expenses, in order to potentially save a bundle on transport.

Audi Q7

Image Source: M 93/Wikimedia Commons

When Expenses Can Be Claimed                  

There are a number of reasons why you might be able to claim a deduction for car expenses, provided that you use your car in the course of performing your duties as an employee. This could include carrying equipment or tools for work, delivering or picking up supplies, or attending business conferences. If you travel between two different places of employment, this could also qualify as work-related transportation, as would a drive to see a client. Many employees use their car for dual purposes, including both private and work-related transportation. If you use your work car for personal travel, you can only claim the portion that is work-related. You can't claim regular trips between your home and workplace, even if you were on call or you ran a few minor work errands on the way. Finally, if your employer already gives you an allowance for your car expenses, this must be included on the tax return.

Types of Car-Related Expenses to Claim

So what qualifies as work-related car expenses? This could include any of these expenses that take place during the regular course of performing your work. The regular cost of operating your car or motorcycle for work purposes could be deducted, such as petrol, oil, and repair fees. Short term car hire, parking fees, and road tolls also fall under this category. Work-related travel expenses could also include taxi fares as well as meal and accommodation costs if you are travelling on work errands. Be sure to keep all of your receipts for work-related expenses, whether you bought a Kumho KL78 with Tyresales online for your work's vehicle or took a taxi from the office to meet a client for a meeting.

Jointly-Owned Cars

Do you and your partner both use the car for work purposes? There are specific rules for claiming work-related car expenses when it comes to jointly owned cars. You can choose from four different claim methods. The cents per kilometre method allows each owner to claim up to a maximum of 5,000 kilometres of work use, provided that the car is used for separate work ventures. The second method is the 12% of original value method, which allows each owner to claim a deduction of 6% of the car's cost. Further methods include deducting one-third of the car expenses, or deducting the car expenses multiplied by the business use percentage. It's a good idea to look into all of these various methods to see which best applies to your situation if you jointly own the car.

The Bottom Line

If you use your car or a car provided by your employer for work purposes, it makes sense to deduct expenses on your tax return. Be sure to look over the rules carefully to make sure you are only deducting expenses that qualify, and find the claim method that best applies to your situation.

Tags: DeductionsPersonal taxTravel

Author: Mr Taxman

Comments

"Hi, I am an assistant Property Valuer. In other words I'm currently training to be a property valuer. I drive from the office to residential premises to inspect and then return to the office to complete the report. My question is can I lease a car and claim the lease repayments as a tax deduction? My colleagues do it but they are Valuers I am only an assistant. Thanks "

By: James on Mar 28, 2015 8:32PM

Post a New Comment

Media Availability

Are you interested in booking Mr Taxman for a speaking engagement or requesting his viewpoints for an article?

comments-rhsLatest Comments

  • "If i used a line of credit to purchase the shares, what documentation do I need to prove the loan was used for investments? Does it matter that I also have a home loan for a owner-occupied home? "

    By: Brad at Oct 18, 2017 9:02AM

    Post: Borrowing to buy shares

  • "HI Mr Taxman, I am part time UBER driver. Since my full time job salary is high and my wife is unemployed, can I get my wife buy a car and rent to me? Each week I pay part of my UBER income as car..."

    By: Peter at Oct 17, 2017 3:42AM

    Post: Marriage

  • "Hi Mr Taxman, great page and comments. I have a question about Bitcoin. Given that Bitcoin is a 'currency', if I am effectively holding bitcoin in a wallet/account (not trading, just buying and..."

    By: MDL at Oct 16, 2017 7:30PM

    Post: Foreign currency trading

  • "Hi, I moved to Australia in Feb 2016 and settled in Sydney. In July i got job in Newcastle but could not move there with family so opted the option of acquiring a temporary accommodation and going to..."

    By: Syed Sajjad Raza at Sep 23, 2017 2:37AM

    Post: Claiming car expenses

  • "Hi Mr. Taxman, I've been doing full-time FX trading for a few years.. on average about 50k USD a year in expenses and 250k - 500k USD a year in pnl. In the US I can deduct expenses and pay around..."

    By: liqdub at Sep 21, 2017 8:34AM

    Post: Foreign currency trading