Claiming work-related travel expenses
When it comes to lodging your tax return, an area where many micro business owners get confused is regarding claiming work-related travel expenses. These tips will help clarify if and how you can claim travel costs.
If you can answer yes to any of the following you may be able to claim travel deductions.
- Do you have to carry bulky goods or equipment used for work?
- Do you use your vehicle for work purposes?
- Are you a home-based worker?
- Do you regularly work at different sites during the day?
- Do you need to use your vehicle to travel to different offices?
Individuals employed directly by a company can claim any travel undertaken between work sites during the day that is necessary for them to perform their duties.
Business owners can generally claim:
- travel between business locations during the day.
- travel relating to the transport of bulky tools and/or materials to and between job sites.
The next step is to decide which method to use in claiming the maximum tax deduction. The four methods are:
"The logbook method leads to the largest tax deduction as long as you have a high business percentage use of the vehicle."
1. Cents per kilometre. Using the ATO’s Rates Per Business Kilometre table, calculate the cents per kilometre for your car’s engine capacity, and then multiply this by the number of kilometres travelled. You can claim up to a maximum of 5000km each year with diary evidence to show how you worked out the number of kilometres travelled. This method is best if you only do a few trips during the year and don’t have a new vehicle of high business percentage use. The maximum you can claim is $3750.
2. 12 per cent of original value. Using this method, your claim will equal 12 per cent of the cost of your car. This is best to use when you have a new vehicle and have travelled more than 5000km that year. You can claim up to 12 per cent of your vehicle cost up to the cost base limit of $57,466 for 2012/2013. For a $50,000 vehicle, for example, the maximum claim is $6000 per year.
3. One third of actual expenses. This is used if you travel more than 5000km per year.
You can only claim one third of the costs of running a car. These expenses are only related to the running costs of the vehicle such as fuel, registration, insurance, services and maintenance. You will need written evidence and invoices to prove your claim.
4. Logbook method. This is best for people who have a high business usage of their motor vehicle. You are required to keep a logbook for 12 weeks, which serves as sufficient record of vehicle usage for the next five years with the same vehicle.
The logbook will allow you calculate a business percentage usage of the car, which should be somewhere around 80 to 95 per cent of total usage. This allows you to claim all running and maintenance, finance costs and deprecation or lease expense on that motor vehicle. You must keep all receipts to prove your claim and be able to substantiate your logbook travel.
This method leads to the largest tax deduction as long as you have a high business percentage use of the vehicle.
If you are unsure whether you can claim travel expenses, or which tax deduction method to use, ask your accountant.
Are you clear on what work-related travel expenses you can claim?