Motor Vehicle Claim – Cents Per Kilometre Method

Do you use your car for work-related purposes?  If so, you can claim a deduction in your Tax Return for this use assisting in reducing the amount of tax you are liable to pay.

There are two different methods available to calculate your work-related car expense, being the Logbook method and the Cents per Kilometre method.  In this article we have focused on the Cents per Kilometre method only.

This method allows you to calculate your deduction for work-related car use based on a dollar rate for each work-related kilometre travelled during the financial year.

The dollar rate is calculated by the Australian Taxation Office (ATO) to take into account all work-related expenses in running your car, such as petrol, servicing and maintenance, decline in value to name a few.  From 1 July 2015 a single fixed dollar rate has been implemented which is applied irrespective on the engine capacity of your car.

You are required to keep a record of your travel, which may be as detailed as a logbook or just a diary note or other records that you can use to support your claim.  As an example, you may travel to a client’s office each week of the year (46 weeks) which is a 10km return trip, resulting in a total of 460kms.

The fixed dollar rate is multiplied by the number of work-related kilometres to give the eligible deduction for inclusion in your Tax Return.   Following on from the above example, the fixed dollar rate for the year ended 30 June 2016 was 66 cents per kilometre.  Multiply the 66 cents by the 460 kilometre from above, and the eligible deduction would be $303.60.

Under this method the maximum number of kilometres that can be claimed is capped at 5,000 kilometres per motor vehicle.  As an example if you travelled more than this, say 6,000 kilometres, then the claim can only be processed at the capped 5,000 kilometres multiplied by the fixed dollar rate for that year.

For tax, work-related purposes means you used your motor vehicle to earn your taxable income, such as using your vehicle to transport goods for work, visit a client’s office, or going to the local stationery supplier or the bank for work purposes.  No claim is available for personal travel, which includes your daily travel to and from work and home.


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Disclaimer: The information contained in this article is general in nature without taking into account any particular person’s situation.  You should consider whether the information is appropriate to your situation and it should not be relied upon as a substitute for specific professional advice.

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