For many years we have had four methods for claiming the use of a motor vehicle in our business or for employment purposes. These methods have been:
· Log Book
· Cents per km – depending on the engine capacity of the vehicle and up to 5000 business kms
· 12% of Original Cost of the Vehicle
· One third of all expenses
The Australian Taxation Office as part of its simplification program have reduced the methods to just (2) two –
(1) Log book method
(2) Cents per Km – up to 5000 business Km's – this is now at one flat rate of 66 cents per km
This took effect from 1 July 2015, however, it appears that some business owners have not quite understood the impact that the removal of these methods have had on their ability to claim motor vehicles expenses and also the GST on these business expenses. For example. if you previously claimed 12% of cost of your motor vehicle, which provided you the best claim, this method has been removed and unless a logbook has been kept you are limited to the 5000 business km's which doesn't always provide the best claim.
During the 2015/2016 financial period information was detailed in our West Currie Consultant newsletter, promoted through our Facebook page, website and direct communication with clients to ensure that they acknowledged that they needed to reassess their motor vehicle methods and that if a client was not comfortable with limiting your claim to 5000 business Km's then you were compelled to complete a log book.
If there is no log book maintained during this period, then the total deduction is limited to $3300.00 – 66 cents per Km. The simplification for the cents per/km method was altered to a flat rate regardless of what engine capacity the vehicle is. This method also restricts the amount GST credits claimable on motor vehicle expenses to only 20%.
As you can see this budget measure for simplification of motor vehicles has actually left some business owners cornered on their motor vehicle claims.
Please note that these simplification rules apply to motor vehicles which are defined as –
· Designed to carry less than one tonne
· And less than 9 passengers
· Motor powered road vehicle – including 4 wheel drive vehicles
Any motor vehicle outside of these parameters are considered commercial vehicles and as such are 100% business claimable.
If you are uncertain about the treatment of your motor vehicles or are wanting to maximise your claim please contact the professional staff at West Currie Consultants.
On another important issue – are you Superstream Compliant? If not, you must be immediately, please contact the office if you need any assistance with registering under the Superannuation Clearing House.