The End of Financial Year (EOFY) is just around the corner, and it's time to gather those receipts and logbooks and get your taxes in order.
Whether it's making the most of EOFY sales, or finding out what can actually be claimed back, it pays to be prepared. Here are the ways, as a car owner, that you can make the most of tax time this year.
Claim Car Expenses
For any motoring expense to be eligible to be claimed as a work expense, the vehicle must be used, at least partially, for business or work-related activity.
So how do you claim a deduction for the business use of your vehicle?
You have a choice of two different methods to calculate and claim on work-related car expenses.
Cents per kilometre method
Simply multiply the number of work-related kilometres you do per year, by an allowance of 66 cents per kilometre (up to a maximum distance of 5,000km).
Just use the formula kilometres/year x $0.66.
So, if you drive 3,000 km/year for work, you are eligible to claim back:
3,000 x $0.66 = $1,980!
Simply keep a detailed travel logbook of all your car use including car odometer readings, travel times, kilometres travelled and the reason for each journey (both business and non-business use) for 12 weeks.
From this logbook, you can calculate the average percentage your car is used for work purposes over the course of a year. From this percentage, you can then claim your total car expenses as a deduction to reduce your taxable income.
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
Are you a small business owner?
Do you own a business with an annual turnover of less than $10m? If you do, you are categorised as a 'small business owner' which means you are eligible for the $20k Instant Asset Write-Off.
The $20k Instant Asset Write-Off was designed to help small business owners claim tax benefits on any 'in-use' assets (costing less than $20,000) that a business has purchased and used in the past year.
Whether it is a car, a computer or tools, if it is used by your business, and it is valued at under $20,000, it can be written-off.
The Instant Asset Write-Off is due to end June 30 this year, so this will be your last chance to claim!
NOTE: If your business is GST-registered, the value of the assets you are claiming are GST-exclusive (eg. You can claim a car that is $19,990 + GST). If your business is not GST-registered, then your asset will be valued GST-inclusive.
Individuals, or businesses that may not qualify for the $20k Instant Asset Write-Off (or are claiming back on items that do not meet the write-off criteria), are able to claim back via the Depreciation Method.
The Depreciation Method takes into account the rates at which the value of your item decreases over time, and so, the tax you can claim back on that item will vary from year to year.
There are two different Depreciation Methods that can be used:
Diminishing Value Method
For items whose value diminishes rapidly over a small number of years, the Diminishing Value Method uses the formula:
Base Value x (Days Held/365) x (200%/asset's effective life span)
So, if you had a $60,000 item you had owned for 1 year that had a lifespan of 5 years, the sum would be:
60,000 x (365/365) x (200%/5) = $24,000 for the first year, with the base value decreasing each year so too would the amount you can claim back for the five-year span.
Prime Cost Method
The Prime Cost Method is used for items whose value decreases gradually over its lifespan. This method uses the formula:
Asset's Cost x (days held/365) x (100%/asset's effective life).
So, by using the same figures as above, the formula would be:
60,000 x (365/365) x (100%/5) = $12,000 every year for a total of five years.
Talk to An Expert
To make sure you are covering all your bases, and making the most of your tax this EOFY, make sure you speak to an expert. Your accountant or tax consultant is invaluable when it comes to the End of Financial Year. They will ensure that you are claiming back everything you can, and making the most of your assets and purchases.
In the weeks leading up to June 30, car dealerships will be dropping their prices. They will be making deals with customers to ensure that they move all of their stock before their EOFY deadline.
So be sure to make the most of the discounts that come with the EOFY, and remember to strap on your bargaining boots - there's always a deal ready to be made.
To get a new car at a great price, talk to our partners at carconnect. They'll do the haggling with dealerships for you and get you the best price on your car - and then deliver it direct to your door!
Looking to make the most of the EOFY sales, and getting a great deal on your finance? Call your finance consultant now on 1300 STRATTON (787 288) or get a 60-second online quote. But be quick, June 30 will be here before you know it!