6 of the biggest car-related tax mistakes Australians make

By Grace Ormsby

June 30 2020
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Forty per cent of all work-related tax deductions in Australia relate to driving and cars, which means that plenty of mistakes are also made. Here’s a list of what not to do when making a car-related claim this tax time.

car-related tax mistakes Australians make

Peer-to-peer car sharing platform Car Next Door CEO said many car owners claim too little when it comes to their car-related expenses at tax time, as opposed to too much.

He highlighted that Australians are often entitled to claim car-related expenses for using their own car to perform a number of work duties.

These may include: carrying tools or other equipment needed for your job, travelling from home to an alternative workplace (like a client’s office) then back to your main workplace or home, travel to meetings, conferences or events as required by your employer, and travelling between two separate workplaces where you are employed and delivering or picking up items as required by your employer.

But there are a number of items that are not allowable tax deductions, while there are others that people don’t realise they can claim on. Here are six of the biggest mistakes Australians make when they are making car-related deductions, according to Will Davies:

Claiming normal travel to and from work

Even if you use your commute to do a small work-related task, like picking up mail, this isn’t claimable.

The same is unfortunately true when you’ve done overtime, or are unable to catch public transport.

Claiming for carrying equipment not required by your employer

While you can claim the carrying of tools or other equipment needed for your job, if you cannot prove this is required by your employer or that there’s no safe place to store your equipment at work, then it can’t be claimed.

Claiming expenses associated with a company car or car purchased through a novated lease

Mr Davies has warned against attempting to “double dip” – you can’t claim expenses that your employer has already paid for, and this includes salary sacrificing arrangements.

Claiming expenses without records to back them up

One of the most common mistakes that car owners make, according to the CEO, is claiming car costs using the ATO’s cents-per-kilometre method without the records to back this up.

While you can claim up to 5,000 km a year at 68 cents in the 2020 tax year, this is not a “free pass”, he conceded – you must have documentation.

Forgetting to claim depreciation

If you use your car for work or rent it out, ask your accountant about how you can calculate depreciation – it may add thousands to your allowable deductions!

Not claiming all allowable expenses, if you rent your car out

For anyone who does rent out their car, the money earned through this is considered taxable income and must be declared on a return.

But expenses can be claimed for the portion of your car costs that do relate to the rental activity, or a simple 68 cents for every kilometre your car is used.

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About the author

Grace Ormsby

Grace is a journalist on Momentum Media's nestegg. She enjoys being able to provide easy to digest information and practical tips for Australians with regard to their wealth, as well as having a platform on which to engage leading experts and commentators and leverage their insight.

About the author

Grace Ormsby

Grace is a journalist on Momentum Media's nestegg. She enjoys being able to provide easy to digest information and practical tips for Australians with regard to their wealth, as well as having a platform on which to engage leading experts and commentators and leverage their insight.

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