ATO warning for Aussies claiming common $2,560 deduction: ‘Don't miss out'
Aussies who use their car for work are being urged to get on top of their taxes now as the end of the financial year fast approaches. With just 12 weeks remaining, the Australian Taxation Office (ATO) said it was important taxpayers 'don't miss out' on potential deductions.
Taxpayers can claim car expenses using the 'logbook method' or the 'cents per kilometre method'. The logbook method is more onerous but allows you claim more kilometres and can therefore potentially give you a bigger deduction.
But if you want to claim the logbook method, the ATO said it was time to start recording your trips now.
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'To claim car expenses using the logbook method, you need to record a 12-week continuous log of all your car trips," the ATO said.
'Your 12-week period must represent your typical travel for the year. Your logbook stays valid for five years—but if your work-related travel changes, then you'll need a new one.'
Aussies can keep an electronic logbook using the myDeductions app or keep a paper logbook.
There are also other apps like Driversnote.
The cents per kilometre method lets you claim up to 5,000 work-related kilometres. The current rate is 88 cents per kilometre, which works out to a maximum deduction of $4,400.
This covers all car expenses, including the vehicle's decline in value, registration, insurance, maintenance, repairs and fuel costs.
The logbook method lets you claim more than 5,000 work-related kilometres but you need to keep a logbook for 12 weeks straight to work out the percentage you can claim.
That includes the destination and purpose of each journey, the odometer reading at the start and end of each journey, and total kilometres travelled.
You also need to keep records of your car expenses, including receipts for fuel, registration, insurance, services, tyres and repairs.
Tax Invest Accounting director Belinda Raso told Yahoo Finance the logbook method was worth doing if you used your car regularly for work and were above the 5,000 kilometre threshold.
'On average, when we have someone that's done the logbook correctly, they can be claiming $10,000 to $12,000 worth of expenses, compared to being stuck at [a maximum of] $4,400,' Raso said.
Raso said someone who missed out on claiming $8,000 on the average 32 per cent tax rate, would be missing out on a refund of about $2,560.
'It makes a huge difference to your tax return,' she said.Sign in to access your portfolio
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