Motor Vehicles – Claiming the correct amount of input tax credits (ITCs)
Earlier this year there was a change to how input tax credits on motor vehicles should be calculated.
The Addendum states that for the purpose of determining the extent of creditable purpose (i.e. GST) for motor vehicle expenses, taxpayers may use one of the following two methods.
- Cents per kilometre method
- Logbook method
Given the pro’s and con’s of each option we would recommend that from 01/07/2020 clients should use the Logbook method.
The two methods explained:
Cents per kilometre method
This can be done using the following formula:
Reasonable estimate of business kilometres per tax period / Reasonable estimate of total kilometres per tax period
Under the cents per kilometre method:
- A single rate is used. Your claim is based on 68 cents per kilometre from 1 July 2018 (or 66 cents per kilometre for the 2017–18 income year).
- You can claim a maximum of 5,000 business kilometres per car.
- You may need to provide written evidence to show how you worked out your business kilometres (for example, by producing diary records of work-related trips).
- Where you and another joint owner use the car for separate income-producing purposes, you can each claim up to a maximum of 5,000 business kilometres.
Logbook method
Under the logbook method:
- Your claim is based on the business-use percentage of the expenses for the car.
- Expenses include running costs and decline in value but not capital costs, such as the purchase price of your car, the principal on any money borrowed to buy it and any improvement costs.
- To work out your business-use percentage, you need a logbook and the odometer readings for the logbook period. The logbook period is a minimum continuous period of 12 weeks.
- You can claim fuel and oil costs based on either your actual receipts or you can estimate the expenses based on odometer records that show readings from the start and the end of the period you had the car during the year.
- You need written evidence for all other expenses for the car.
Links
About the changes https://www.ato.gov.au/law/view/document?DocID=%22GST%2FGSTR20064%2FNAT%2FATO%2F00001%22&PiT=20200122000001