“Tax Office moves to decrease vehicle claims” by Steve Marsten

Tina and I delivered our annual tax and property update seminar recently, pointing out the various risk areas tax payers face in the coming 12 months with deductions and claims. One point that many people weren’t necessarily aware of is the changes to the vehicle claims.

In recent years there has been a surge in motor vehicle expenditure claims as deductions against wages income and small business revenues. Between 2009 and 2014 the increase was over 30%. Now in some cases the ATO seems to think there is something sinister behind this increase, however I suggest that if they investigate a little further they will find that the rise in deductions is a reflection of the changing work patterns and the fact that many small business owners are simply a lot more mobile. Gone are the days of the simple 9 to 5 office hours.

So previously taxpayers had the option of claiming under four different methods. If you travelled over 5,000 kilometres for business or work related travel in your own car, you could choose from the following:

·         The Log Book method

·         One third of costs method

·         12% of the car value method or

·         The statutory (cents/Klm) method up to 5000 kilometres

From the 1^st July, 2015 the ATO is scrapping the One Third of cost and the 12% of value methods. This leaves the simple statutory method and the more comprehensive logbook approach.

The other issue that is we feel is a bigger concern, is the changes that are planned for the cents per kilometre method. Previously taxpayers who drove vehicles larger than 1.6 litres could claim 76c or 77c per kilometre. The new rate is just 66c regardless of the size of your vehicle. This change in cents per kilometre will impact on many taxpayers and many have not realised that this issue will have the impact of reducing tax claims by up to 15%.

That said it is our advice that it might be time to consider completing a logbook. Yes it will only be useful if you travel more then 5000 klms for income producing purposes but it only needs to be completed for a 12 week period and it can last for 5 years once it’s finalised. This should be completed before 30^th June in order to be useful for your 2016 tax.

At Sothertons we ensure that taxpayers are aware of how best to organise your tax records to minimise your tax legitimately. Give our experienced team a call on 4972 1300.