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Edited version of your private ruling
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Ruling
Subject: Car expenses
Question 1
Are you entitled to a deduction for the business use of car expenses using one of the four methods in Division 28 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer
No.
Question 2
Are you entitled to a deduction for the business use of car expenses you actually incur and which you can substantiate?
Answer
Yes.
Question 3
If you keep a log book and odometer records for the whole period, is this sufficient to substantiate the business use of the expenses?
Answer
Yes.
This ruling applies for the following period
Year ended 30 June 2012
The scheme commenced on
1 July 2011
Relevant facts
You are a manager.
You have hired a car for a twelve month period which will be used for business and personal use.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 8-1
Income Tax Assessment Act 1997 Division 28
Reasons for decision
Section 8-1 of the ITAA 1997 allows a deduction for all losses or outgoings to the extent to which they are incurred in gaining or producing assessable income, except to the extent that they are outgoings of a capital, private or domestic nature. Car expenses, including the short term rental of a car, fall for consideration under this section.
Special substantiation rules apply to car expenses and section 28-12 of the ITAA 1997 provides that if you own or lease a car or hire a car under a hire purchase agreement, you must calculate your car expense using one of the four methods in Division 28 of the ITAA 1997. The four methods are cents per kilometre, 12% of original value, one-third of actual expenses and the log book method. However if you do not own or lease the motor vehicle, Division 28 of the ITAA 1997 does not apply.
Section 28-165 of the ITAA 1997 indicates that for cars taken on rental basis, you cannot use one of the four methods to calculate your deduction for car expenses. Instead, you must calculate the deductions under the normal principles governing deductions, including the rules for apportioning a loss or outgoing that is only partly attributable to producing assessable income. This means you claim the business proportion of the actual costs associated with the renting of the car.
You are a manager and in order to do your job you are required to travel. You have hired a car for a twelve month period.
As stated above, you cannot use one of the four methods for calculating your car expenses as you will be hiring a car. However you can deduct the actual cost of car rental charge to the extent that it is used in the carrying out of your employment duties.
You should retain evidence for all expenses and of your business travel to show how you have calculated your claim. For example, these expenses may be substantiated by using a log book and odometer records which must be kept for the whole period you wish to claim.
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