Motor vehicle expenses for Sole traders and partnerships
If you operate your business as a sole trader or partnership (where at least one partner is an individual), the way to calculate your deduction depends on the type of vehicle and how it is used. The car can be owned, leased, or hired under a hire purchase agreement.
You can only claim motor vehicle expenses that are part of the everyday running of your business such as travelling between different business premises.
If the vehicle is used for both private and business purposes, you must exclude any personal use such as driving your children to school.
Cars
For cars, you can use the cents per kilometre method or the logbook method:
Cents per kilometre method
You can claim a maximum of 5,000 business kilometres per car.
The rate per kilometre (68 cents from 1 July 2018 to 30 June 2020 and 72 cents from 1 July 2020) considers your car running expenses, including depreciation.
You can’t make a separate claim for depreciation of the car’s value. You don’t need written evidence, but you must be able to show how you worked out your business kilometres (for example, calendar or diary records)
For claims above 5,000 kilometres, you must use the logbook method to claim the entire amount.
Logbook method
You can claim the business-use percentage of each car expense,
based on logbook records.
You must record:
– when the logbook period begins and ends
– the car’s odometer reading at the start and end of the logbook period
– details of each journey including
- – start date and finishing date
- – odometer readings at the start and end
- – kilometres travelled
- – reason for the journey.
You must keep the logbook for a period (at least 12 continuous weeks) representing your travel throughout the year. You can then use this representative period to calculate your claim for five years if you:
– keep the logbook
– take odometer readings at the start and end of each year that you use it.
Work out the percentage of business travel from your logbook and use this to claim your business-related car expenses.
You cannot claim capital costs, such as the purchase price of the car, but you can claim this as depreciation.
Other vehicles
For all other vehicles, you can’t use the cents per kilometre or logbook method. Your claims must be for actual costs for expenses you incurred, based on receipts. You can use a diary or journal to separate private use from business use.
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