As house prices rise on the back of ridiculously low interest rates, the next area of growth will be ‘new car sales’ as home-owners feel wealthier and splash out. This will also be fuelled by the fact that car sales are coming off a lower base owing to the Covid lockdown so there’s pent up demand.
If you’re planning on buying a new car for business use, there’s a few things you need to know that could save you thousands of dollars in tax.
First of all, here are the 7 deductions you are able to claim;
- Fuel & Oil
- Repairs and Servicing
- Interest on a motor vehicle loan
- Lease paymentstax deductionstax deductions
- Insurance premiums
Importantly, if you’re using your car for both personal and business use, you need to know how to calculate the percentage attributable to business use to ensure you claim the correct and fair amount on your tax.
There’s three optional ways to do this and it may depend upon your business structure as to which one applies, or which one is most useful to you. Just give me a quick call or email, if you need some guidance on this.
3 options for calculating motor vehicle expenses;
- Logbook method– where you log all your driving for a 12-week period and then multiply your total expenses by the percentage used for business.
- Cents per kilometre method– mainly for partnerships and sole traders, this method allows you to record how many kilometres you drive for business purposes and then multiply it out by the cents per kilometres to a maximum of 5,000km per income year.
- Actual cost method– as the name suggests, this method entails recording all the receipts for the expenses actually spent maintaining the vehicle and the percentage of depreciation relevant to business use.
The trick to all of these deductions is to seek professional advice because it’s easy to make a simple error and we don’t want you inviting the unwanted attention of the Australian Tax Office.
As we move into tax season, it’s important to seek advice about your taxes, right now!
Please click below if you need help.