Motor Expenses for Small Businesses

If you want to claim Motor vehicle expenses in your business there are few things you need to be aware of…

The way to calculate your claim depends on your business structure and type of vehicle: -

Types of motor vehicles:

The type of motor vehicle you drive can affect how you calculate your claim. A motor vehicle is either a car or an ‘other vehicle’.

Car

A ‘car’ is a motor vehicle that is designed to carry:

• a load of less than one tonne, and

• fewer than 9 passengers.

Many four-wheel drives and some utes are classed as cars. Your motor vehicle is an ‘other vehicle’ if it is not a car.

Other vehicles include:

• motorcycles

• minivans that can carry 9 or more passengers

• utes or panel vans designed to carry loads of one tonne or more.

Business Structure:

Sole Traders & Partnerships

Can claim either - Cents per Km method or Actual costs via Log book method. You can only claim motor vehicle expenses that are part of the everyday running of your business (such as travelling between different business premises). If the vehicle is used for both private and business purposes, you must exclude any private use (such as driving your children to school).

Companies and Trusts

If you operate your business as a company or trust, you can only claim the actual costs for motor vehicle expenses that are part of the everyday running of your business (such as travelling between different business premises, visiting clients or picking up goods for sale). You can only claim actual costs based on receipts for expenses incurred.

You cannot use the cents per kilometre or logbook method to calculate your claim.

Methods

Cents per Km method:

You can claim a maximum of 5,000 business kilometres per car per income year using the cents per kilometre method. Rates are reviewed regularly so make sure you check the rate for the income year you are claiming for. The rate is 78 cents per kilometre for 2022–23 and takes all of your car running expenses, including depreciation, into account. This means you can’t make a separate claim for depreciation of the car’s value.

You don’t need written evidence, but you must be able to show how you worked out your business kilometres (for example, calendar or diary records)

For claims above 5,000 kilometres, you must use the logbook method to claim the entire business portion amount.

Logbook method :

You can claim the business-use percentage of each car expense, based on logbook records. You must record:

• when the logbook period begins and ends

• the car’s odometer reading at the start and end of the logbook period

• details of each journey, including start date and finishing date, odometer readings at the start and end, kilometres travelled, and reason for the journey.

You must keep the logbook for a period (at least 12 continuous weeks) that is representative of your travel throughout the year. You can then use this logbook to calculate your claim for 5 years if you:

• keep the logbook

• take odometer readings at the start and end of each year that you use it.

Types of expenses

Common types of motor vehicle expenses you can claim include:

• fuel and oil

• repairs and servicing

• interest on a motor vehicle loan

• lease payments

• insurance

• registration

• depreciation (decline in value) of the vehicle.

Speak to your Accountant for more specific information suited to your businesses circumstance.

(Reference: ATO Website. )