Work-Related Car Expense Deductions

Work-Related Car Expense Deductions

by | Jun 20, 2024 | Business advisory

Maximizing Your Work-Related Car Expense Deductions

 

Understanding how to accurately claim work-related car expenses can significantly impact your tax return. Whether you’re an employee who uses a personal vehicle for work purposes or a business owner managing a fleet of vehicles, navigating the Australian Taxation Office (ATO) guidelines can be complex. We aim to simplify the process and provide clear, actionable advice to help you maximize your deductions while staying compliant.

 

Understanding Work-Related Car Expenses

Work-related car expenses refer to the costs you incur when using your vehicle for work purposes. These expenses can include:

  • Travel between different workplaces (for the same employer).
  • Attending meetings, conferences, or training sessions.
  • Transporting work-related tools or equipment.
  • Traveling to client sites or job locations. 

It’s important to note that ordinary commuting from home to work and back is generally not deductible. 

 

 

Methods for Claiming Car Expenses

 The ATO provides two primary methods for claiming car expenses: the cents per kilometre method and the logbook method.

Cents Per Kilometre Method

  • This method allows you to claim a set rate for each kilometre travelled for work purposes.
  • You can claim 85 cents per kilometre
  • You can claim up to a maximum of 5,000 kilometres per year using this method.
  • Detailed records of your work-related travel aren’t required, but you need to be able to demonstrate how you calculated the number of kilometres claimed (e.g., through a diary or a log).

Logbook Method

  • This method requires you to keep a logbook of your work-related and personal travel to determine the percentage of your car use that is work-related.
  • Your logbook needs to cover a continuous 12-week period, and it’s valid for five years unless your vehicle usage significantly changes.
  • You can claim all running costs (fuel, oil, servicing), depreciation, and other expenses (insurance, registration) based on the work-related percentage calculated from your logbook.
  • Detailed records of all car expenses and the logbook itself are essential.

What You Can Claim

  • Fuel and oil 
  • Repairs and maintenance 
  • Depreciation of the car’s value 
  • Interest on a car loan 
  • Lease payments 
  • Insurance premiums 
  • Registration fees

 

Key Considerations and Tips

 Keep Accurate Records

  • Regardless of the method you choose, maintaining accurate records is crucial. This includes receipts, invoices, and a detailed logbook if you’re using the logbook method. Digital tools and apps can simplify this process.

Avoid Common Pitfalls

  • Commuting Costs: As mentioned, travel from home to work is generally not deductible unless you’re carrying bulky tools or equipment required for your job.
  • Private Use: Ensure that you only claim the work-related portion of your car expenses. The ATO scrutinizes claims that seem excessive or unrealistic.

Seek Professional Advice

  • Tax laws and regulations can be complex and subject to change. Consulting with a tax professional or accountant can provide tailored advice and ensure you’re maximizing your deductions while staying compliant with ATO guidelines.

 

Conclusion

Navigating work-related car expense deductions can be challenging, but with the right approach and accurate record-keeping, you can optimize your tax return. Whether you opt for the cents per kilometre method for its simplicity or the logbook method for potentially higher deductions, understanding the rules and maintaining thorough documentation is key.

For personalized advice and assistance with your tax return, consider consulting us. Our team of experts is here to help you navigate the complexities of tax deductions and ensure you get the most out of your work-related car expenses.

 

 

 

 

 

 

Disclaimer: This blog is for informational purposes only and does not constitute financial or tax advice. Please consult with a professional accountant or tax advisor for specific advice related to your circumstances.

Your guide to claiming working from home expenses for 2023–24 income year

Your guide to claiming working from home expenses for 2023–24 income year

by | Jun 20, 2024 | Business advisory

A taxpayer who carries on part or all their business or employment activities at home may be entitled to a deduction for part of their outgoings related to working from home.

There are two ways to calculate a work from home deduction:

Fixed rate method

From 1 July 2022, the revised fixed rate method allows individuals to claim running expenses incurred as a result of working from home at 67 cents per hour (PCG 2023/1).

The revised rate accounts for energy (electricity and gas), phone, internet, stationery and consumable expenses.

Also, a taxpayer is no longer required to maintain a dedicated workspace at their home.

To claim the fixed cost method, taxpayers must keep a record of:

  • the total number of hours worked from home (for the entire year)

  • the additional running expenses covered by the rate per hour (for example, phone bill, electricity bill, stationery and computer consumables etc.)

  • any depreciating assets (and how much of their use of that asset was work-related).

A separate deduction may be claimed for any depreciating assets (not included in the rate per hour), like office furniture or technology.

Actual cost method

The actual cost method allows you to claim a deduction for the actual expenses incurred as a result of working from home.

To claim the actual cost method, taxpayers must keep a record of:

  • the number of hours worked from home (whether that be the total hours, or a continuous four-week period representing the usual pattern of work, if their hours are consistent throughout the year)
  • their additional running expenses (for example, phone bills, electricity bills)
  • how the deduction was calculated.

Contact us

Please feel free to contact our office, should you need help with collating the necessary information or preparing draft calculations to claim your work from home expenses.

2024–25 Federal Budget Highlights

2024–25 Federal Budget Highlights

by | Jun 7, 2024 | Business advisory

The Federal Treasurer, Dr Jim Chalmers, handed down the 2024–25 Federal Budget at 7:30 pm (AEST) on 14 May 2024.

Described as a “responsible Budget that helps people under pressure today”, the Treasurer has forecast a second consecutive surplus of $9.3 billion. The main priorities of the government, as reflected in the Budget, are helping with the cost of living, building more housing, investing in skills and education,strengthening Medicare and responsible economic management to help fight inflation.

The key tax measures announced in the Budget include extending the $20,000 instant asset write-off for eligible businesses by 12 months until 30 June 2025, introducing tax incentives for hydrogen production and critical minerals production, strengthening foreign resident CGT rules and penalising multinationals that seek to avoid paying Australian royalty withholding tax.

The Budget also includes various amendments to previously announced measures, as well as a number of income tax measures that have already been enacted prior to the Budget announcement, including:

  • The revised stage 3 personal income tax cuts (enacted by the Treasury Laws Amendment (Cost of Living Tax Cuts) Act 2024 (Act No 3 of 2024)).

  • Medicare levy and surcharge threshold changes (enacted by the Treasury Laws Amendment (Cost of Living—Medicare Levy) Act 2024 (Act No 4 of 2024)).

  • A specific exemption for Australian plantation forestry entities from the new earnings-based rules introduced as part of thin capitalisation reforms (enacted by the Treasury Laws Amendment (Making Multinationals Pay Their Fair Share—Integrity and Transparency) Act 2024 (Act No 23 of 2024)).

These enacted measures have not been discussed in detail in this report.

The government anticipates that the tax measures put forward will collectively improve the Budget position by $3.1 billion over a 5-year period to 2027–28.

The full Budget papers and the Treasury ministers’ media releases are available on-line.

The tax, superannuation and social security highlights are set out below.

Income Tax

  • The instant asset write-off threshold of $20,000 for small businesses applying the simplified depreciation rules will be extended for 12 months until 30 June 2025.

  • The foreign resident CGT regime will be strengthened for CGT events commencing on or after 1 July 2025.

  • A critical minerals production tax incentive will be available from 2027–28 to 2040–41 to support downstream refining and processing of critical minerals.

  • A hydrogen production tax incentive will be available from 2027–28 to 2040–41 to producers of renewable hydrogen.

  • The minimum length requirements for content and the above-the-line cap of 20% for total qualifying production expenditure for the producer tax offset will be removed.

  • A new penalty will be introduced from 1 July 2026 for taxpayers who are part of a group with more than $1 billion in annual global turnover that are found to have mischaracterised or undervalued royalty payments.

  • The Labor government’s 2022–23 Budget measure to deny deductions for payments relating to intangibles held in low- or no-tax jurisdictions is being discontinued.

  • The start date of a 2023–24 Budget measure to expand the scope of the Pt IVA general anti-avoidance rule will be deferred to income years commencing on or after assent of enabling legislation.

  • Income tax exemptions for World Rugby and/or related entities for income derived in relation to the Rugby World Cup 2027 (men’s) and Rugby World Cup 2029 (women’s).

  • Deductible gift recipients list to be updated.

Social Security

  • Social security deeming rates will be frozen at their current levels for a further 12 months until 30 June 2025.

  • Carer payment recipients will have greater flexibility with their participation requirements.

  • Eligibility for the higher rate of Jobseeker payment will be extended to single recipients with a partial capacity to work of zero to 14 hours per week.

  • The maximum rates of the Commonwealth Rent Assistance will increase by 10% from 20September 2024.

  • Funding will be provided to implement a social security means test treatment for military invalidity payments affected by the Full Federal Court’s decision of FC of T v Douglas 2020 ATC ¶20-773; [2020] FCAFC 220.

  • Funding will be provided to enable Australia to enter into a bilateral social security agreement with Uruguay.

  • Foreign investors will be allowed to purchase established build-to-rent properties with a lower foreign investment fee.

Superannuation

  • Superannuation will be paid on government-funded paid parental leave (PPL) for parents of babies born or adopted on or after 1 July 2025.

  • The Fair Entitlements Guarantee Recovery Program will be recalibrated to pursue unpaid superannuation entitlements owed by employers in liquidation or bankruptcy from 1 July 2024.

Tax Administration

  • The ATO will be given a statutory discretion to not use a taxpayer’s refund to offset old tax debts on hold.

  • Indexation of the Higher Education Loan Program (and other student loans) debt will be limited to the lower of either the Consumer Price Index or the Wage Price Index, effective from 1 June 2023.

  • A pilot program of matching income and employment data of migrant workers will be conducted between the Department of Home Affairs and the ATO.

  • A new ATO compliance taskforce will be established to recover tax revenue lost to fraud while existing compliance programs will be extended.

  • The ATO will have additional time to notify a taxpayer if it intends to retain a business activity statement refund for further investigation.

  • The 2019–20 Budget measure “Black Economy — Strengthening the Australian Business Number system” will not proceed.

GST

  • Refunds of indirect tax (including GST, fuel and alcohol taxes) will be extended under the Indirect Tax Concession Scheme.

Excise and Customs Duty

  • Tariffs identified as a nuisance across a range of imported goods will be removed from 1 July 2024.

  • The start dates for certain components of a measure to streamline excise administration for fuel and alcohol announced in the Coalition government’s 2022–23 Budget will be deferred.

Get is touch to discuss how the Budget announcements impact you.

Maximise Savings: Analyse Your Business Expenses

Maximise Savings: Analyse Your Business Expenses

by | May 14, 2024 | Business advisory

Managing business expenses effectively is crucial for financial health. Costs, overheads, and supplier bills can gradually deplete cash reserves, hindering growth and profitability.

To combat this, take proactive steps in spend management. By controlling expenses and reducing costs, you can boost cash flow, improve profit margins, and pave the way for business success.

Here are actionable ways to trim company expenses:

  • Reduce Overheads: Analyse unavoidable costs like rent, utilities, and payroll. Consider downsizing premises or optimizing workforce size to cut overheads.

  • Implement Expense Limits: Set spending caps for staff and provide training on effective spend management. Use expense management tools for tracking and control.

  • Source Cost-Effective Suppliers: Compare quotes and negotiate better deals with suppliers. Consider switching to more competitive providers if necessary.

  • Streamline Operations: Adopt lean practices to minimise operational costs without compromising output. This approach enhances profitability and cash flow.

  • Explore Tax Relief: Investigate available tax incentives such as R&D credits to reduce tax burdens and boost financial efficiency.

I highly recommend Artha Tax and Accounting Services! Their expertise and attention to detail have made managing my finances a breeze. The team is responsive, reliable, and goes above and beyond to ensure everything is in order. Grateful for their outstanding service!

– Julie Onyango

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Tips for dealing with economic uncertainty in your business

Tips for dealing with economic uncertainty in your business

by | Apr 11, 2024 | Business advisory

You can’t avoid economic uncertainty but you can change the way you deal with it. Strong communication with your team will help your business get through.

With political changes and an economic slowdown to contend with, we’re in pretty unpredictable waters. Here are some tips on managing your team in times of uncertainty:

  • Support staff wellbeing
  • Talk to staff about wellbeing regularly and openly. Let your team know it’s okay to feel stress or anxiety.
  • Regularly remind your people where to find support, whether it’s through free counselling or mental health resources, or through company health plans.
  • Put wellbeing practices in place
  • Ask your team what could help their wellbeing and balance. Consider team activities, on-the-job skill sharing and learning, and charity events.
  • Be clear about cost-cutting

Change on the cards? Communicate opening and frequently, using information that is easy to understand, relevant, and factual. Don’t offer false hope or reassurances.

Let people know if there is nothing new to communicate or if you are still working out your plans. Consulting effectively with staff can reduce the stress of uncertainty as you look to make changes in your business.

Rinku is a dream to work with. Extremely professional, timely and reliable; she goes above and beyond to assist you with everything you need. Can’t speak highly of the service she has provided and the level of effort she places in making sure your accounting needs are well-taken care of.

– Jhonny B

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