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An individual can claim deductions for car expense if the individual uses his/her own car for work related purpose as an employee. Scenarios include the following:
It will be shown on individual’s payment summary if individual receives an allowance from employer for car expense. Such allowance is an assessable income and it must be included in the tax return. Individual can’t claim deductions if the person travels from home to work.
An individual can claim deduction for following cases
There are four methods to calculate deductions. Among them Cent per Kilometer and Logbook methods will be followed from 1st July 2015.
1. Cent Per Kilometer
After changes of July 2015, separate charges based on the size of the engine are no longer available.
Individual can Claim
2. Log Book Method
Using logbook method, an individual can claim tax deduction based on individual’s car percentage that is the percentage of Kilometer the individual travelled by car for business purpose.
Logbook maintainer need to keep the following things:
Example: If a person travels 6,000 kilometers in total for the 12-week period, and 1,500 of these were for business-specific purposes, the person would do the following calculation:
1,500 ÷ 6,000 × 100 = 25
Here, car’s business use percentage would be 25%. This percentage can be claimed based on vehicle expense.
3. 12 % of original value method
Individual can claim deduction based on 12% of original cost when the person leases the car for first time.
4. One-third of actual expense method
Individual can claim 1/3 of car expenses if the person travels more than 5000 km for business purpose.