ATO crackdown on car expenses

June 2018

The ATO has announced that it will be closely examining claims for work-related car expenses in income tax returns for the 2017-18 year as part of its broader focus on work-related expenses.

There are two ways to calculate a deduction for car expenses: The cents per KM method limiting claims for work-related travel to up to 5,000km and using a log book to determine the work-related percentage of actual expenses.

Which is the best approach?

The ATO has stated that each year around 870,000 people claimed the maximum amount under the cents per km method.

Noting that while it is legitimate to claim for 5,000 km if the taxpayer did actually travel at least this far in the course of earning assessable income, the ATO is concerned that some taxpayers mistakenly believe that this is a "standard" deduction they are entitled to, without needing to provide any evidence of having travelled that distance, or even having undertaken any travel at all.

Even though the cents per km method does not require a log book for substantiation purposes, taxpayers still need to have travelled as part of their employment or other income earning activities and need to be able to show how they calculated their claim.

For example, this could include keeping a diary of places they had to drive to for work, and how often this happened.

The ATO's announcement contains a number of case studies describing common situations where work related car expenses are being claimed incorrectly, including false logbooks, claiming for home to work travel, and employees claiming deductions for amounts paid by employers.

Contact us for more information

If you're intending to claim car expenses, it's worth discussion which approach works best for you or your business with your accountant. Contact Bates Cosgrave on 02 99574033 for more information.


Follow Bates Cosgrave on Linkedin, Facebook or Twitter


This article is provided for information purposes only and correct at the time of publication. It should not be used in place of advice from your accountant. Please contact us on 02 9957 4033 to discuss your specific circumstances.

Share this

Get Small Business News each month

ChineseLanguage Select