As the end of the financial year nears, it’s worth thinking about tax time! And with a few weeks remaining, that means any last-minute deductions, or things to be aware of when it comes time to claim deductions.
While there are a wide array of permutations and individual circumstances to consider, here are the most common deductions applicable to motorists.
Car Expenses (Work Related)
If you use your personal vehicle to perform your job for your employer, there are a variety of instances where you may deduct the associated costs to perform said duties. In particular, this area generally concerns: the commute between multiple places of employment or alternative workplaces, attending meetings or conferences at a third party venue, carrying tools or bulky equipment, delivering items or collecting supplies.
Private commutes, including the daily trip between home and work, as well as expenses which employees are reimbursed, cannot be claimed.
A few years ago, the government abolished two of the methods by which motorists could calculate their car-related expenses, and also made small adjustments to the other two methods.
As it stands, motorists may only choose between the cents per kilometre method (for FY23, 78c per km up to 5000 business kilometres), and the logbook method (measuring the running costs and depreciation of the vehicle attributable to business purposes through 12 weeks of odometer readings). For both of these options, written evidence may be required, so ensure you refer to the ATO’s website for details.
Business Car Financing
For businesses, there are also aspects to consider. Currently, under instant asset write-off provisions, businesses can claim an immediate deduction against the purchase of an asset valued less than $150,000, providing they are using, or about to use, the asset before the financial year comes to a close. This amount is subject to the size of a company’s turnover.
Vehicles are included among the assets that can be instantly written-off. As such, eligible businesses can claim an immediate deduction for the business portion of the cost of a car in the year the vehicle is first used, or for other assets, installed and ready for use.
The “Car Limit” threshold for a car for the 2022–23 financial year is $64,741, and that includes eligible second-hand vehicles as well.
The asset write-off value will decrease in FY24 to $20,000, which means businesses are likely to have a hard time trying to apply this benefit in the next financial year.
Elsewhere, in instances where a car is leased for business purposes, you may claim work related expenses as previously documented. If you were making GST payments against the lease’s monthly instalments and the residual value of the car, then some or all of this can be claimed as Input Tax Credits on your Business Activity Statement. Lease rentals may also be claimed as a deduction, subject to financing amounts.
Make sure you speak to an accountant about the ins and outs of this rule, as there are some specific eligibility requirements for businesses and assets.
The Fincar team is here to help you with all your financing needs. Contact us today to help arrange your next car or equipment loan.