There are several conditions for you to be able to claim Motor Vehicle Expenses:
- You can claim Motor Vehicle expenses if you need to travel from site to site, or to pick up supplies and materials. You normally are not allowed to claim travel expenses from your home to your workplace. However, if your home is a primary place of work then you can claim travel outside of your house if required to do so for work purposes.
- You can claim Motor Vehicle Expenses if you are required to transport tools/equipment for your work, including from home to your work site.
- You have to own the vehicle that you are claiming expenses for. (It has to be under your name)
- You can’t claim car expenses if the costs have been reimbursed by your employer.
There are two options to calculate Motor Vehicle expenses as follows:
Cent per km method: You can claim up to 5,000 business kms for a fixed rate of 78 cents/ km for your 2020-2021 tax return. This option does not require written evidence, as it is based off an estimate. However, you should be able to explain or justify your travel, both the distance travelled and how it was work related.
Tom works as a chef in a restaurant. Every day, he drives to and from his home to the restaurant, which is 5km away. He also makes trips from the restaurant to his supplier daily, which is 3km to and from.
The amount that he would be able to claim would be calculated as such:
3km x 5 days (a week) x 48 weeks (assuming 4 weeks of annual leave) = 720km
720km x $0.78 = $561.60
Note that Tom would be unable to claim his travel expenses from his home to the restaurant, as that is not an allowable deduction.
Logbook method: You can claim the actual percentage of motor vehicle expenses. However, you would need a logbook record including the beginning and end readings of the motor vehicle odometer. This will require you to keep a record of at least 12 continuous weeks. These 12 weeks will be representative of your annual travel, and you will be able to estimate your annual motor vehicle expenses based on expenses for the 12 weeks. Alternatively, you can keep multiple logbooks for the entire year to get exact figures. There is no limit on the number of kms or costs that can be claimed via this method.
Jerry is an electrician. He drives to his client’s homes to work, as he has to carry heavy tools with him. As he travels a lot for work purposes, he decides to keep a logbook. He records all his travel for 12 weeks, including both work and personal trips. After the 12 weeks, he tallies up the total business (work) kms travelled. He divides it by the total kms travelled, and determines the percentage of travel that is deemed to be work-related.
If Jerry had travelled a total of 500km during the 12-week logbook period and found that out of the 500km, 400km was for work (business kms), the following would be his calculation:
400 business kms/ 500 total kms = 80% (work related percentage of travel)
If Jerry totals up all his car expenses for the year (including fuel, maintenance, insurance, depreciation, cleaning) and it adds up to $10,000, he can multiply that amount by his work-related percentage:
$10,000 x 85% = $8,500
He would be able to claim $8,500 as Motor Vehicle Expenses.