ATO tax deductions missed and costing Australians refund windfalls

Australians are missing out on up to $9 billion a year in tax deductions related to the use of motor vehicles by employees, sole traders and other business owners, new research shows.

Billions of dollars in tax deductions are likely to be missed this year as employees, sole traders and other business owners fail to claim enough work-related kilometres they drive.

Taxpayers are avoiding motor vehicle logbooks and instead opting for simpler tax deduction methods allowed by the Australian Taxation Office (ATO), but accountants warn this practice potentially halves their deductions.

Logbooks only need to be filled out for 12 weeks once every five financial years unless circumstances change, and April 7 is exactly 12 weeks before June 30.

Mileage tracking company GoFar has examined work-related travel data from the ATO, Bureau of Statistics and industry reports, and estimates up to $9 billion is under-claimed annually.

Drivers who use a logbook for 12 weeks can potentially double their tax deductions.

“People don’t bother with logbooks because they are busy and recording kilometres is a time sink,” GoFar CEO Danny Adams said.

“The main under-claim is probably the 720,000 Aussies who claim exactly 5000 kilometres.

“If you claim 5000km or less you don’t need to keep a logbook so it’s much easier. While a few of these may actually be driving exactly 5000km – and some may even be padding the claim – most are knowingly deciding to miss out in order to reduce the burden of paperwork.”

The ATO increased its kilometre rate from 68c to 72c this financial year, and its 5000km limit equates to a maximum $3600 deduction. However, couriers, drivers and others often spend much more fuel, repairs, insurance, registration, depreciation, loan interest and lease payments.

Kelly+Partners CEO Brett Kelly said many Australians did not know the tax benefits that could come from completing a log book.

“The effort is worth it, so start counting work trips,” he said.

Kelly+Partners CEO Brett Kelly

GoFar CEO Danny Adams

Mr Kelly said people could not claim the cost of commuting to and from their regular workplace, but other business-related trips could be claimed if a work purpose and other details were logged.

“If you started to use your car for business-related purposes less than 12 weeks before the end of the income year, you can continue to keep a logbook into the next year so it covers the required 12 continuous weeks, starting this year from April 7,” he said.

Chartered accountant and Mr Taxman founder Adrian Raftery said in his experience clients who had not used logbooks missed out on claiming double their allowable deductions.

“My estimate is there’s 10 or 15 per cent (of taxpayers) who should do a logbook but don’t,” he said.

Dr Raftery said the ATO was monitoring motor vehicle claims by comparing people’s deductions and occupations with those in similar occupations.

“If their claim is a lot more than average, they are more likely to be audited,” he said.

CLAIMING CAR EXPENSES

The Australian Taxation Office says people cannot claim for trips between work and home, but can claim for:

• Performing work duties

• Attending work-related meetings and conferences

• Travelling between two places of employment if neither is their home

• Travelling from home to an alternative workplace then to their normal workplace

• Travelling between shifting places of employment, such as multiple sites daily

Source: ATO