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Car claims to be closely examined by ATO in 2017-18

Posted by Northadvisory on May 21, 2018

Recently, the ATO has issued a point of emphasis for the upcoming tax lodgement season. They will be employing additional audit resources along with updated data analytics to scrutinise large car expense claims.

Please be advised that in order to make a claim under D1 car expenses in your tax return, you need to adhere to what the ATO describes as the three “golden rules”:

  1. You must have spent the money yourself and not reimbursed by your employer.
  2. The car claim must be directly related to earning your assessable income.
  3. You must have correct records to prove it.

Cents per kilometres method

A deduction is calculated at a prescribed rate and is allowable for up to 5,000 km of income-producing use of the car. The maximum cents per kilometre claim can be made even if more than 5,000 business use kilometres. Under this method, full substantiation is not required, however, the deduction must be calculated based on a reasonable estimate of income-producing kilometres.

“Log book” method
A deduction for a percentage of the total car expenses is allowed as long as odometer records are kept. The odometer records must be kept every five years, and containing details of all business trips for a period of 12 weeks. For the 2017/18 income year, a log book will only be valid if it commences from 1 July 2013.

All expenses relating to the car must be kept in order to substantiate the log book claim, with the exception of fuel and oil costs. Fuel and oil costs can be substantiated by reference to odometer records, using a reliable estimate for distance and bowser price.

If you require any further information in relation to this year’s car claim, including the specific substantiation requirements, please contact our office and we can walk through them with you.

Our office would be pleased to assist you to ensure that your records regarding this year’s claim are acceptable based on the ATO guidelines.