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ATO focus on work-related car expenses

Posted by Northadvisory on August 25, 2017

The ATO is warning taxpayers that they are paying close attention to claims for work-related car expenses this tax time.

Assistant Commissioner, Kath Anderson, said “standard” claims were a common error. “Some people think they are entitled to a ‘standard deduction’ for car expenses, using the cents per kilometre method, but this is not the case. While it’s true that you don’t need written evidence for claims of up to 5,000 kilometres per year, you do need to be able to show that you were required to use your car for work, and how you calculated your claim,” she said.

Over 3 million people made a work-related car expense claim in 2015/16, totalling around $8.5b. Ms Anderson said a significant proportion of these claims were right at the limit that does not require detailed records. “While we have no issue with people using the cents per kilometre method and we expect that most claims at this threshold may be legitimate, we are reminding people that there’s no such thing as a ‘free pass’ when it comes to deductions,” she said.

Car expenses incurred in performing your duties as an employee are generally deductible, but taxpayers usually can’t claim trips between home and work unless they’ve got a good reason, such as carrying bulky tools or equipment to work.

Example

A railway guard claimed deductions for car expenses in travelling to and from work, basing his claim on the fact that he carried bulky tools (including his flag, safety vest, handheld radio, torch, instructions and timetables) in his car. He attracted an audit because his deductions were much higher than those of other people in the same occupation. His employer advised us that secure facilities for equipment were available on the business premises, so the transportation of equipment was the employee’s choice. For this reason, expenses relating to travelling to and from work are not an allowable deduction in this situation, and the taxpayer had to pay $2,000 for tax owed plus interest.

If you have any questions regarding your work related car expenses deduction claims , please do not hesitate to contact us.

Martin van der Saag
Director
T: 02 9984 7774
E: martinv@northadvisory.com.au

Norman Ruan
Accountant
T: 02 9984 7774
E: normanr@northadvisory.com.au