Are you aware of how to claim for motor vehicle expenses?
Most business operators are aware they can claim for motor vehicle expenses as a tax deduction when a vehicle is used for generating income.
There are elements of confusion with some small business operators falling into a trap of not being aware of the correct method for their circumstances.
There are two ways to claim motor vehicle expenses:
- Cents per kilometre;
- Using a logbook;
The simplest method is the cents per kilometre method, However there is a capped claim of 5000 kms per car per year under this method and if you do more than 5000kms you may find that the log book method is more tax effective.
You need to keep records of your work related trips and the total kilometres travelled.
Rates for all motor vehicles for the year 2021 and year 2022 are 72cents per km.
The logbook method requires you to keep a record of all your travel, work and private, in a log book for a continuous period of at least 12 weeks.
You then calculate your business use percentage and apply this to your total car expenses for the year. You also need to record and keep documents to support your total vehicle expenses for the year.
Overall, when making a claim, you are able to choose the method that gives you the best result. Your choice can change each year but you must keep the appropriate records.
MKG Partners can help you in determining the best method for your business.