Car Expenses - Changes to Tax Deduction Rules

Are you an individual who has been claiming tax deductions for car expenses? If yes read on as the following changes took effect from 1 July 2015:

Cents per Kilometre Method – up to 5,000 Business Kilometres

The three previous deduction rates (66, 76 or 77 cents per km) have been replaced with a flat rate of 66 cents per kilometre regardless of the car’s engine size. This rate also applies to hybrids and pure electric cars. The maximum deduction is limited to 5,000 business kilometres per year. You will now need to use the log book method to claim higher tax deductions.

12% of Original Value Method

This method is no longer available. You will need to switch to the log book method or cents per kilometre method.

One Third of Actual Expenses

This method is also no longer available. You will need to switch to the log book method or cents per kilometre method.

Log Book Method

This method continues unchanged.

It requires that a log book is kept for a representative 12 week period and that you can substantiate all expenses – for example by keeping receipts. A new log book is required every sixth year.

Is There a Better Way?

In some circumstances it may be more tax effective for employees to “salary package” a company car than to claim personal tax deductions. 

Please contact us for more information.