What The Crackdown On Car Expense Tax Claims Means For You
The Australian Tax Office has promised to crack down on Aussies making false work-related car expense claims on their tax after more than $7.2 billion was claimed in the last financial year alone.
More than 3.8 million Aussies claimed work-related car expenses in the 2017-18 financial year, with the ATO now promising to put similar claims under the microscope, after a string of dodgy claims were discovered.
In one instance last year, the ATO said a "red flag" was triggered when a claim totalled $4,800.
The taxpayer was asked to provide their logbook before ATO officers discovered they had used a car service logbook rather than a logbook kept for calculating their work use car percentage. It was later discovered the taxpayer hadn't undertaken a single work-related car journey during the year.
In another case, an office worker claimed $3,300 for 5000 kilometres of work-related travel, before it was discovered his employer did not require him to use his car for work, while a third had claimed $350 for public transport costs to and from their retail job.
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The Golden Rules Of Car Expenses Claims
There were three golden rules to remember when making car expenses claims.
The first is that generally trips between home and work cannot be claimed unless you are required to use your car for work for a specific purpose.
"You must have a work-related need to travel while performing your job, like travelling from site to site or be required to transport bulky tools."
The ATO is also concerned about "double-dipping" and said there were a number of cases of people claiming car expenses that had been paid for or reimbursed by their employer.
Finally, the ATO has warned taxpayers must keep records to prove how they worked out their claim in the first place.
How Are Claims Calculated?
There are two main methods to claim car-related expenses on tax -- the cents per kilometre method and the log book method.
The cents per kilometre method is based on a set rate of 68 cents per kilometre and limits taxpayers to claiming a maximum of $5,000, because claims can be made without receipts.
But taxpayers must show how they worked out their business kilometres -- the ATO suggests keeping diary records of work-related trips.
The logbook method is based on the percentage of work use of your car and your actual expenses, the ATO said.
Using this method, taxpayers are required to keep their logbooks which broadly represent work-related car travel throughout the year for a minimum continuous period of 12 weeks.
Receipts can also be used to claim fuel and oil costs, with taxpayers also required to record their odometer readings at the start and end of each income year.
In the 2017-18 year, over 3.6 million people made work-related car claims totalling more than $7.2 billion.
In the 2016-17 year, 3.75 million people made similar claims, totalling around $8.8 billion.
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