Your car as a business expense: what can you claim?
Being self-employed can be tough – but it does have its advantages. One of those advantages is the possibility of being able to allocate some of your costs to business expenditure, so you reduce your tax bill. That includes your home office, your phone, and your vehicle.
Dividing up personal use and business use
If you use your car for work-related trips, some of the running costs can be allocated as a business expense.
The situation is simple for a vehicle that is only used for your business: all the costs of running and maintaining it are a business expense and are tax deductible. For example, company vehicles that stay at HQ and are only driven to job sites; or a van you only drive when you’re doing deliveries.
In most cases, though, our self-employed clients use their vehicles for a mixture of work and personal trips. They might drive to work during the week, then take the kids to football at the weekend, all in the same car. If that sounds familiar, you’ll need to keep track of which trips are for work and which ones are personal, so you can allocate costs correctly.
Keeping track of costs
There are 3 ways to do this – keeping a logbook, claiming 25% of the vehicle's running costs or adding up the actual costs.
If you don’t keep a logbook, the most you can claim is 25% of running costs. So it’s worth logging your trips if you think more than a quarter of them are work-related.
You should also keep records of:
- fuel spending
- maintenance costs
- your Warrant of Fitness and rego expenses
- insurance
- and parking.
You don’t need to hold onto a physical invoice - just a digital ‘paper’ trail will do the job.
Logbook
You can keep a logbook to find out how much you usually use the vehicle for business. Use the kilometre rates to calculate the deduction for costs and depreciation for the business use of your vehicle.
When self-employed people use kilometre rates, they do not need to consider GST. Kilometre rates include depreciation. If you use this
method, you will not claim a separate depreciation deduction or recovery of depreciation for the vehicle.
Use these rates to work out your vehicle expenses for the 2022-2023 income year.
Answering your questions about vehicle expenses
Some of the most common questions we get asked are whether it’s worth keeping a logbook (we can quickly figure that out), how much deduction you can get (we’ll run the numbers) and what happens when your payments are mixed up across business and personal accounts (happens all the time!).
So give us call, drop us a note or pop in – we’re here to answer all your tax questions.