A large number of Australians are reliant on cars for transport, and use them for both personal and business purposes. As a result, it is possible for business owners to claim some of their transport related expenses on tax. There are a number of different ways in which this can be done, so it is vital to seek advice from a taxation specialist or financial advisor, on which method would be the most suitable for your business.

However, in defining what constitutes business related travel expenses, it is important to note that you cannot claim for any travel between your home and workplace. This is regardless of whether you work outside of normal hours, live too far from public transport, or are in a job where you are required to be on call.

The following is a guide to the different methods which can be applied when calculating the amount of travel related expenses to be claimed back on tax.

• The logbook method This method enables a business owner to calculate exactly how much of the vehicle's use was business related, as a percentage. In order to establish this figure, a logbook is kept. This shows the number of kilometres travelled per journey, as well as the car's start and finish odometer readings, and the total number of kilometres travelled over the period. This record has to be taken over at least a period of twelve continuous weeks, and is valid for five years.

• The one-third of total car expenses method Under this method, as the name suggests, a business owner is able to claim one-third of their total car related business expenses. It is important to note that this does not include the cost of the car, or any other up-front improvements, and that it needs to have travelled more than five thousand business related kilometres for this method to be used. Some examples of expenses that can be claimed as part of the designated one-third include petrol, oil, insurance, registration and repairs to the car. In order to claim these things, a comprehensive record of the expenses needs to be maintained, and receipts need to be included.

• The twelve percent of original value method Using this method enables the business owner to claim back twelve percent of the cost price of the car. If they have leased the car, they are able to claim back twelve percent of the market value it had at the time the lease began. Again, the car has to have travelled five thousand kilometres for business purposes if this method is to be used. Unlike the above two approaches, where precise written evidence has to be shown, the business owner does not have to provide a record. However, it is important to keep in mind that while the actual figures may not have to be reported, an explanation of how they were reached may be required.

• The cents per kilometre method This method allows business owners to claim their expenses based on the number of kilometres they have travelled for business reasons. This figure, which can be no more than five thousand kilometres, is multiplied by a set rate, and divided by one hundred. This rate is set according to the car's engine capacity. For example, in 2007 the cents per kilometre rate for an ordinary car with a 1.6 litre engine capacity was fifty-eight cents. Again, as with the above method, written documentation of the business related travel may not be necessary, but the business owner may need to show how they calculated the amount to be claimed.

Business owners can also claim what is known as a fuel tax credit. To do this, they have to be registered for GST and the fuel tax credit scheme. You are eligible to make a claim if you have been driving a vehicle that has a Gross Vehicle Mass (GVM) of more than 4.5 tonnes on a public road, and have been filling it with either petrol or diesel.

The amount that can be claimed as a fuel tax credit is determined by multiplying the fuel tax credit rate for travelling on a public road, which is currently 18.51 cents per litre, by the number of litres used for business purposes. Again, a detailed record has to be kept, and it should show how many litres of petrol or diesel was bought, as well as what has been used for business, as opposed to personal reasons.

There are a number of other travel related expenses that business owners can claim. For example, if you were to travel long distances, and had to stay overnight to break the journey, the cost of accommodation and meals could be claimed. However, if you travel a reasonably long distance, but don't stay overnight, the cost of meals cannot be claimed.

In making a claim, it is not necessary to keep a record if the travel is within the reasonable allowance limit. In contrast, if the travel extends for more than six nights in a row, written evidence needs to be provided.

Finally, businesses can claim expenses relating to their travel such as the cost of parking or car hire, fares, and road tolls.

Source

Australian Taxation Office, "Claiming a deduction for car expenses using the cents per kilometre method," www.ato.gov.au/individuals/content.asp?doc=/content/33874.htm, 13th June 2007.

Australian Taxation Office, "Claiming travel expenses: what you can claim," www.ato.gov.au/individuals/content.asp?doc=/content/16391.htm&page=2&H2, 13th June 2007.

Australian Taxation Office, "So what's stopping you? Claim fuel tax credits for your business," www.ato.gov.au/content/downloads/n15397_01_2007.pdf, 2007.

Australian Taxation Office, "Work related car expenses: methods of claiming work related car expenses," http://calculators.ato.gov.au/scripts/axos/help/car1.htm.

Queensland Public Sector Union, "Getting a tax deduction for your work-related expenses," www.qpsu.org.au/extra_downloads?0406-tax08-work.pdf.