Modernising the methods of use for calculating work-related car expense deductions
There are currently 4 different methods by which tax payers can claim the tax deduction for work-related car expenses.
Methods of calculating work-related car expense deductions will be modernised from 1 July 2015 income year by: –
- Removing the option to claim a deduction using the “12% of original value method” or the “one-third of actual expenses method”, which are used by less than 2% of those who claim work-related car expenses as a means of streamlining the system and reducing compliance costs.
- The “cents per kilometre method” will be based on one rate set at 66 cents per kilometre for all motor vehicles. The Commissioner will announce updates of the rate annually. The deduction under this method will continue to be capped at a maximum of 5,000 kilometres.
- The logbook method of calculating travel expenses will be retained.
These changes will not affect leasing and salary sacrifice arrangements. These changes aim to better align car expense deductions with the average costs of operating a motor vehicle.
Those people currently using the methods being removed should start planning now, making a decision as to whether they will complete a log book or rely on the cents per kilometre option.