Practice Statement Law Administration
PS LA 1999/2Calculating joint car expense deductions
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FOI status: may be released
|1. How should the taxpayer calculate the deduction?|
|2. Method 1 - cents per km|
|3. Method 2 - 12% of the original value|
|4. Method 3 - one third of actual expenses|
|5. Method 4 - using a logbook|
|6. More information|
|This practice statement is an internal ATO document, and is an instruction to ATO staff.
If taxpayers rely on this practice statement, they will be protected from interest and penalties in the following way. If a statement turns out to be incorrect and taxpayers underpay their tax as a result, they will not have to pay a penalty. Nor will they have to pay interest on the underpayment provided they reasonably relied on this practice statement in good faith. However, even if they don't have to pay a penalty or interest, taxpayers will have to pay the correct amount of tax provided the time limits under the law allow it.
This Law Administration Practice Statement explains how car expense deductions are calculated if the car is jointly owned, leased or hired under a hire purchase agreement.
1. How should the taxpayer calculate the deduction?
- cents per kilometre
- 12% of the original value
- one third of actual expenses
- using a log book.
Each taxpayer should use only one method in any one income- year in relation to a specific vehicle. However, each of the joint owners can use a different method to calculate their deductions if they wish.
2. Method 1 - cents per km
Each joint owner or joint lessee can claim a maximum deduction of 5,000 kilometres for each income year. That limit applies to a particular taxpayer in relation to a particular car, not to the car itself; so, if each of the joint owners uses the car for separate income producing purposes, they can each claim up to 5,000 kilometres.
3. Method 2 - 12% of the original value
Method 2 allows each of the joint owners to claim a proportion of the original cost of the car, to a total of 12%. That is, if there are two joint owners then they can each claim a deduction of 6% of the original cost of the car.
4. Method 3 - one third of actual expenses
Taxpayers using this method can deduct one-third of the car's expenses (whether wholly their own or incurred jointly with other owners or lessees; and not including capital expenses) plus one third of their share of the depreciation.
5. Method 4 - using a logbook
- when the logbook period begins and ends
- the car's odometer readings at the start and end
- the total number of kilometres that the car travelled
- the number of kilometres travelled for work
- the business use percentage.
For each logbook period, the taxpayer would calculate their deductions as follows:
(Total km the taxpayer travelled to produce their assessable income divided by the total number of kilometres the car travelled) multiplied by (the total car expenses incurred plus the car's total depreciation for the period).
6. More information
- on how the four methods work, see Income and deductions - Car expenses
- an online calculator to assist with the calculation of car expenses, see Work-related car expenses calculator
|Date of amendment||Part||Comment|
|21 May 2015||All||Updated to new LAPS format and style|
|22 April 2014||Contact details||Updated.|
|6 December 2011||Related public rulings||References to IT 2398 and TD 93/177 (withdrawn) removed|
|28 April 2011||Various||'Tax Office' updated to 'ATO' as per Style Guide recommendations.|
|16 September 2008||Contact details||Updated.|
|7 April 2008||Contact details||Updated.|
|1 June 2004||Various||Legislative references updated.|
Date of Issue: 29 April 1999
Date of Effect: Ongoing
File NO 99/4924-1; NO 96/9842-6; NO 96/4745-7
deductions and expenses
documentation and records
motor vehicle expenses
motor vehicle use substantiation
salary and wages expenses
|Other Business Lines consulted||GST, CS & C, LBI, OCTC|