The chal­lenge: Maria Bekiaris

Take care: what­ever method you choose, you must be able to sub­stan­ti­ate a claim

Money Magazine Australia - - CONTENTS - An­nette Samp­son

Don’t look now, but … That’s ex­actly what it’s do­ing. The tax of­fice re­cently warned tax­pay­ers it was pay­ing close at­ten­tion to work-re­lated car ex­penses this year. In par­tic­u­lar, as­sis­tant com­mis­sioner Kath An­der­son says it will be look­ing at “stan­dard” de­duc­tions to en­sure they can be jus­ti­fied.

“Some peo­ple think they are en­ti­tled to a stan­dard de­duc­tion for car ex­penses us­ing the cents per kilome­tre method but this is not the case,” she says. “While it’s true you don’t need writ­ten ev­i­dence for claims of up to 5000 kilo­me­tres per year, you do need to be able to show that you were re­quired to use your car for work, and how you cal­cu­lated your claim.” Com­mon pit­falls

An­der­son says a com­mon mis­take is claim­ing car ex­penses for travel be­tween your home and place of work. These costs are not de­ductible, as they are not di­rectly re­lated to per­form­ing your work du­ties. One ex­cep­tion is where you have a good rea­son for claim­ing – such as be­ing re­quired to trans­port bulky tools or equip­ment to work. How­ever, even then you must be able to prove your em­ployer re­quired you to do so, and there was no safe place to store them.

An­der­son says the tax of­fice au­dited a rail­way guard whose claims were much higher than oth­ers in the same oc­cu­pa­tion. He had claimed car ex­penses to and from work be­cause he had to trans­port bulky tools in his car. His em­ployer told the tax of­fice stor­age fa­cil­i­ties for these items were avail­able at work. It was the em­ployee’s own choice to carry them back and forth. So his claim was de­nied and he had to pay $2000 for tax owed plus in­ter­est.

In another case a school cross­ing safety of­fi­cer claimed for car­ry­ing his safety sign to and from work. How­ever, it turned out the sign was stored on the school premises so the claim was de­nied.

An­der­son says another pit­fall is dou­ble dip­ping, or claim­ing ex­penses that your em­ployer has al­ready paid ei­ther through re­im­burse­ment or through a salary sac­ri­fice ar­range­ment.

One au­dit found a man­ager who claimed $3800 in car ex­penses did not ac­tu­ally own his car. It was held un­der a no­vated lease ar­range­ment where the em­ployer leases the car on the em­ployee’s be­half. The claim was dis­al­lowed and the tax­payer was hit with a penalty.

Meth­ods of claim­ing

From July 2015 the op­tions for claim­ing car ex­penses were re­duced from four pos­si­ble ways to just two.

Un­der the cents per kilome­tre method you can claim 66¢ per kilome­tre trav­elled for work pur­poses in 2016-17 up to a max­i­mum limit of 5000 kilo­me­tres. This is the method be­ing tar­geted by the tax of­fice, as you don’t need writ­ten ev­i­dence to sub­stan­ti­ate your claim. How­ever, you do need to be able to show how you worked out your busi­ness kilo­me­tres such as be­ing able to pro­duce diary records of work-re­lated trips.

The al­ter­na­tive is the log­book method. This is more gen­er­ous in that you can claim things such as run­ning costs and the de­cline in the car’s value (but not cap­i­tal costs such as the pur­chase of the car or loan re­pay­ments) rather than be­ing limited to 66c per kilome­tre. How­ever, you are re­quired to keep a log­book and odome­ter read­ings for at least 12 con­tin­u­ous weeks show­ing how you used the car. This log­book is valid for five years.

The log­book must show the odome­ter read­ing at the start and end of the log­book pe­riod, the to­tal kilo­me­tres trav­elled, the start and fin­ish­ing times and odome­ter

read­ings of work-re­lated trips and the rea­sons for the jour­ney, and the busi­ness-use per­cent­age over this pe­riod. You can claim costs such as fuel based on your ac­tual re­ceipts or es­ti­mates based on the odome­ter read­ings at the start and end of the pe­riod you used the car dur­ing the year. Where the car is used for both busi­ness and pri­vate use, ex­penses must be ap­por­tioned.

The tax of­fice has a car ex­penses cal­cu­la­tor at ato.gov.au. Sim­ply en­ter “work re­lated car ex­penses cal­cu­la­tor” in the search field to find it.

The golden rules

An­der­son says there are three golden rules to stay out of trou­ble. First, you have to have spent the money your­self. Your em­ployer can’t have re­im­bursed you. Sec­ond, the claim has to be di­rectly re­lated to earn­ing your in­come and, third, you need some type of records to prove your claim.

An­nette Samp­son has writ­ten ex­ten­sively on per­sonal fi­nance. She was per­sonal fi­nance edi­tor with The Sydney Morn­ing Her­ald, a for­mer edi­tor of the Her­ald’s Money sec­tion and a colum­nist for The Age. She has writ­ten sev­eral books.

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