How The Way You Calculate Car Expenses Is Going To Change

How The Way You Calculate Car Expenses Is Going To Change

Used to claiming car expenses as part of your tax return? The way you calculate those could be about to change.

Cars picture from Shutterstock

Two key points up front. Firstly, this change only applies from the 2015-2016 income year, so it won’t affect the way you do your 2014-2015 tax return. Secondly, this change won’t affect you if your car is supplied via a lease as part of a salary sacrifice arrangement — it’s only for people who claim expenses for occasionally using their car for work purposes.

So what’s changing? Right now, there are four different methods you can use to calculate car expenses. Two of those — 12 per cent of the original value and one-third of actual expenses — will be eliminated. According to the ATO, less than 3 per cent of claims are made using either of these methods.

The other two methods — using cents per kilometre or maintaining a logbook — will be retained. However, the cents per kilometre method will be simplified, with the existing set of three different rates for varying engine sizes replaced with a flat rate of 66 cents per kilometre.

While legislation hasn’t yet passed, if you use the cents per kilometre method, you’ll need to start applying that rate for any travel after July 1. Remember that you can only claim for directly work-related travel. In particular, journeys to and from home to your normal place of work can’t be claimed. The ATO says it is cracking down on travel deductions, so don’t try and make claims that aren’t valid.

Reminder: For specific tax advice relating to your individual situation, consult a registered professional.


  • Just a heads up, Angus. The ATO link in the article leads to a ‘Page not found’ error.

  • Cents per km will be “simplified”. In practice for most drivers it will be reduced. Here are the rates for FY2014/15:
    Up to 1.6 litre – 65 cents/km
    1.6-2.6 litre – 76 cents/km
    Over 2.6 litre – 77 cents/km

    So unless you drive a small car (<1.6 litre engine) your per km tax deduction for car use will reduce from next year to 66 cents/km

  • What if I drive a Tesla? (Not that I do but I’d like to know in case I get a sudden windfall).

    • There is further categories that then get placed into these. For example I used to have an Rx7 with a 1.3L rotary engine but rotaries were classed into the Largest segment if my memory serves me correctly. There would be a consideration like this for electric vehicles, probably into the lowest segment.

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