As the End of Financial Year (EOFY) approaches, now is the time to be thinking about your finances and how to make the most of tax-time. You may be able to claim a deduction for the business use of your vehicle, take advantage of the instant asset write-off, or even get a great price on a new car in the EOFY sales.
How do I claim a deduction for business use of my vehicle?
If you're an individual lodging a tax return and want to claim your motoring expenses, your vehicle must be used for business or work-related activity some of the time.
There are two methods to calculate work-related car expenses:
Cents per kilometre method
Determine the number of work-related kilometres you have driven for the year (up to a distance of 5000km), then multiply this by an allowance of 66 cents per kilometre.
Keep a detailed travel logbook for 12 weeks including car odometer readings, travel times, kilometres travelled and the reason for each journey (whether it’s business or personal).
From this logbook, you determine what percentage of car use is for work purposes. From this percentage you can then claim your total car expenses as a deduction to reduce your taxable income.
The following is an example of the Logbook Method from the Australian Tax Office (ATO):
At the end of the income year, Tim's logbook shows he travelled a total of 11,000 kilometres, of which 6,600 were for business. To work out the percentage the car was used for business purposes, Tim made the following calculation: 6,600/11,000 x 100 = 60% Tim's total expenses, including depreciation, are $9,000 for the income year. To work out how much he could claim, Tim completed the following calculation: $9,000 x 60% = $5,400
Make sure you keep all records and receipts of your motoring expenses throughout the year.
Take advantage of the $30k instant asset write-off
If you own a small business, you probably know about the instant asset write-off originally introduced by the government in the 2015/16 budget. The great news is that the instant asset write-off has now been extended to 30 June 2020, and the threshold increased to $30,000.
This is great news if you own a business, as you can take advantage of immediate deductions. You can claim any asset you use for your business that decreases in value over time, including; work vehicles, machinery, tools, office equipment, IT hardware and much more.
Can I claim it?
The $30k write-off is available to all small businesses with an annual turnover less than $50 million. The entire cost of the asset must be less than $30k, and there’s no limit on the number of assets you can claim.
If your asset is worth more than $30k, you can still claim the deduction, but over several years, as opposed to being able to claim it all back in the one financial year and having that money on hand to help your business grow.
Any asset you buy and use before June 30 this year will be eligible to be claimed. From 1 July 2019, all purchases will be included in next year’s tax return - which means you'll have to wait a year to get your money back in your pocket! So don’t miss out, get in touch with a Stratton consultant who can help put you on the right foot for the next financial year!
EOFY sales – buy a new car while they’re hot!
The weeks leading up to the EOFY are a great time to buy a new car. Dealers are keen to move their stock to meet annual sales targets and clear old stock before the new financial year begins.
There will be a lot of promotions and discounts in the EOFY sales, so go prepared with pre-approved finance so you can take advantage of them.
To get an even better deal, our car sourcing partner carconnect can do the legwork for you and save you thousands off the RRP! They will take care of the purchase, the finance and the insurance, and deliver your new car direct to your door.
If you want to take the hassle out of buying and financing a car, speak to one of our finance consultants on 1300 787 288 or get an online quote and find out how Stratton can help you make the most of tax time. But hurry, June 30 will be here before you know it!