Motor vehicle expenses
You generally cannot claim the cost of trips between home and your workplace as this is a private expense. However, you can generally claim the cost of any businessrelated travel.
This means if you are carrying on a home-based business, you can claim the cost of trips between your home and other places if the travel is for business purposes.
For example, you could claim the cost of travel to:
- a client's premises if you are working there or delivering some documents
- purchase equipment or supplies
- do your banking
- the post office to mail out invoices
- see your tax adviser about a matter related to your business.
There are a number of approved methods available to sole traders and partners in a partnership to calculate motor vehicle expense claims. You can choose the method that suits your circumstances best.
Examples: Motor vehicle expenses
Alex (sole trader)
While Alex's electrical business is based at his home, he spends most of the day working at his clients' premises. He has to transport bulky tools and equipment, including an extension ladder, in order to do his work. Alex has had his van specially fitted out with shelving, tool boxes and roof racks to suit the supplies and tools and equipment he uses. His private use of the van is very limited.
Because of the special fit-out and very limited private use, Alex can claim a deduction for 100% of his van's running costs. He does not have to make an adjustment to his claim to account for his private use of the van.
Vinh and Barbara (partnership)
Vinh and Barbara each have a car. They use both their vehicles to visit their clients and conduct other business activities, such as banking and collecting supplies. Vinh and Barbara can both claim a deduction for trips they make to their clients' premises and their other business related travel.
Barbara completed a log book to keep track of her business travel for 12 weeks. The log book showed that she used her vehicle 40% for business use and 60% for private purposes. Barbara uses this log book percentage to claim 40% of her total expenses for that car.
Vinh uses his car less than Barbara and chose to use a simpler cents per kilometre method of working out his claim. He estimated his business use of his car averages around 3,600km; that is:
- 80km per week visiting clients
- 10km per week for other business use
- 40 weeks in the year.
To work out his claim, Vinh multiplies the business kilometres he travels by the cents per kilometre rate we publish each year. The 2016 rate for Vinh's car is 66 cents per kilometre. Therefore, Vinh calculates his claim as follows: 3,600km x 66c = $2,376.
Pam does most of her work in her home office but visits her clients' offices about twice a week. Pam's company owns the car and the company can claim 100% of the expenses it incurs to run the car. As Pam uses the car for private purposes too, the company may have to pay fringe benefits tax.
End of example