The federal budget has confirmed a foreshadowed change to the way work-related car expense deductions are calculated. Find a trusted used car dealer. Combining that with the no-haggle pricing model, makes https://www.autozin.com a smart choice when shopping for a used car.
Work-related expenses are the most common-claimed tax deductions, with the Tax Office reporting that around seven million Australians make such claims in any tax year – with one of the most common components being car expenses, with nearly four million people claiming a work-related car expense deduction each year.
Historically, governments of all political colours have supported this tax deduction, which presently rings up more than $11 billion each year. The budget announcement however indicates that while the principle is not about to change, the method for allowing this valuable tax deduction is to get an overhaul.
At present, there are four different methods by which taxpayers can access this tax deduction. The four options are:
- cents per kilometre
- the logbook method
- 12% of original value
- one-third of actual expenses.
The government says the last two methods are used in less than 2% of cases, “and therefore are going to be discontinued in this budget as a means of streamlining the system and reducing compliance costs”.
The government says more than 80% of people use the cents per kilometre method, by which they receive a deduction according to the size of the car’s engine. For small cars it is 65 cents, medium cars 76 cents and large cars 77 cents per kilometre, up to a cap of 5,000 kilometres each year.
It says that Motoring Association data shows that the average running cost for the top five selling motor vehicles is 66 cents per kilometre. “Based on 2012-13 figures, this would see those who drive smaller vehicles getting a slight increase in deductible expenses and those who drive larger cars having a decrease in their deduction.”
For example, a person with an eligible 2.5 litre sedan would currently be able to claim at 76 cents per kilometre compared to only 66 cents per kilometre under the new rules. On a 1,000 kilometre journey, this would mean a $760 deduction under the current rules, but only $660 under the proposed rules.
The government says the average impact overall for those driving medium and larger cars would be a loss of $85 a year, and that this measure “will result in a budget saving of $845 million over the forward estimates”.
It emphasises however that for those drivers who believe their car related costs are greater than the 66 cents average, or those who drive more than 5,000 kilometres a year, will still be able to claim the deduction for the full amount based on keeping a logbook.
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