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Work-related car expense is a common tax deduction item. In fact, almost 4 million taxpayers claim this deduction every year. If you are planning to claim a deduction for business or work related car expenses while lodging your tax return, you need to know about the changes in the methods used to calculate the deduction amount.
Previously there were four methods to claim car expenses, which were:
Recently the government has made some changes. From 1st July, 2015, you can no longer use the 12% of original value method and one-third of actual expenses methods. For the 2016 financial year and future year, there will be only two ways to calculate the deduction amount and those are:
Cents per Kilometre Method:
Now you can use a single rate of 66 cents per kilometre for all motor vehicle whatever the engine size is. And you can claim a maximum of 5,000 business kilometres per car using this method.
To claim the deduction using this method, you need to keep a logbook for a minimum continuous period of 12 weeks. You will need odometer readings for the logbook period because you can claim fuel and oil costs based on those records or actual receipts. And you will need written evidence for all other expenses.
So, if you are planning to lodge your tax return online, keep yourself updated with these new rules and file your tax return hassle free.