What car expenses you can and can’t claim at tax time

The Australian Taxation Office are putting car related tax expenses under the microscope this year. Here is some things you can and can’t claim.

If you’re looking to make a little extra cash with your car, beware — ride share drivers and peer-to-peer vehicle sharers are on the Australian Taxation Office’s watch list this year.

Will Davies, head of Australian car sharing platform Car Next Door, says that falsely misrepresenting your car’s earnings or tax deductions could lead to fines of up to $4200.

The ATO assistant commissioner, Karen Font, says that those that over claim will be caught out.

“We are still concerned that some taxpayers aren’t getting the message that over-claiming will be detected and if it is deliberate, penalties will apply,” she says.

“While some people do make legitimate mistakes, we are concerned that many people are deliberately making dodgy claims in order to get a bigger refund.”

If you use car sharing platforms, Davies says, you can claim a number of expenses including the full membership fee. On top of that you can also claim part of the registration, insurance, servicing, cleaning, fuel and even depreciation.

If you need to car tools for work — and there is no where safe to store them you can claim car related expenses.

Davies says that you can alternatively choose to claim the 68 cents for every kilometre of time the car is rented out, but you’ll need logbook proof. The car share platform should be able to provide you with a breakdown of kilometres driven during bookings.

And for those that don’t sign their car up to sharing programs, there are still numerous expenses that can be claimed legitimately.

However, Davies has identified some of the biggest mistakes Aussies can make when claiming car related expenses on their tax returns.

Car Next Door boss Will Davies.

One of the biggest mistakes he says people make is claiming normal travel to and from work. This is not tax deductible — even if there are no public transport options.

But you can claim driving to external meetings and travelling between separate workplaces.

Workers are entitled to claim the use of their car if they are required to carry equipment. But if this isn’t required by your employer or there is no safe place to store it at work you cannot claim it.

Another pitfall is double-dipping on company cars or those on novated leases. You can’t claim expenses on the use of a vehicle paid for by an employer or on salary sacrifice arrangements.

The ATO backs up this advice: “We see taxpayers claiming for things like private trips, trips they didn’t make, and car expenses their employer paid for or reimbursed them for,” says Ms Font.

“Doing the wrong thing is not victimless. When you claim a refund you’re not entitled to, you’re stealing from the whole community and disadvantaging those who do the right thing.”

But drivers could potentially be missing out on claiming one of the biggest ongoing costs — depreciation. Ask your tax accountant to calculate the depreciation to see of you are eligible to claim and it could save you thousands.

Originally published as What car expenses you can and can’t claim at tax time