3 days ago
ATO tax return warning to millions over common car deduction: ‘You can't'
Millions of Aussies claim car expenses on their tax returns each and every year. But the Australian Taxation Office (ATO) has warned people not to make this common mistake to try and boost their returns.
About nine million Australians claimed $28 billion worth of work-related expenses in their 2023-24 tax returns. One of the top claims was for car expenses, with 3.6 million people claiming $10.3 billion worth of expenses.
To claim a tax deduction, you need to be travelling for work purposes. But travel from your home to the office won't count, except in very limited circumstances.
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'In most cases, you can't claim car expenses for your normal trips between home and work. However, there are some exceptions,' the ATO said.
'For example, you can claim a deduction for the cost of trips between home and work if you need to carry bulky tools or equipment.'
The ATO said the tools or equipment will need to be 'bulky', meaning they are awkward to transport because of their size and weight and can only be transported conveniently using a motor vehicle.
The tools and equipment will also need to be 'essential' to perform your work, and there must be not secure storage for the items at the workplace.
That means you can't just choose to transport the tools or equipment when your employer already provides secure storage.
Other circumstances where you may be able to claim trips between home and work include where your home is a base of employment, or when you have shifting places of work.
How do I claim car expenses?
There are two methods that people can use to make car travel claims: the 'cents per kilometre method' and the 'logbook method'.
The cents per kilometre method lets you claim up to 5,000 kilometres at a set rate of 88 cents per kilometre and you don't need receipts.
But H&R Block director tax communications Mark Chapman told Yahoo Finance that if you automatically claim the full amount, it could set off alarm bells.
'The ATO is concerned that some taxpayers are automatically claiming 5,000 kilometres without having proof that they actually undertook the journeys,' Chapman said.
'So, every time you use the car for a work trip, make sure to note down in a diary the number of kilometres you travelled and what the purpose of the journey was.'
The logbook method lets you claim more than 5,000 kilometres, but you'll need to keep a logbook that shows you work-related trips for 12 weeks.
'If you use the other method of claiming work-related car expenses – the 'logbook' method – you actually need to keep a logbook in order to be eligible to make a claim, plus invoices or receipts for all the individual expenses you want to claim, such as fuel, servicing, etc,' Chapman explained.
