ATO Practice Statement Law Administration

PS LA 1999/2

SUBJECT:	Calculating car expense deductions where the car is jointly owned, jointly leased or jointly hired under a hire purchase agreement (but is not owned, leased or hired by a partnership)

This version is no longer current. Please follow this link to view the current version.

• Refer to end of document for amendment history. Prior versions can be requested by emailing TCNLawPublishingandPolicy@ato.gov.au if required.
  This document has changed over time. View its history.

FOI status: may be released

STATEMENT

1. A taxpayer who jointly owns or jointly leases a car (or jointly hires a car under a hire purchase agreement) and uses the car for income producing purposes can claim a deduction for car expenses using one of the following four methods:

2. Joint owners can use different methods from each other in calculating their deductions under Division 28 of the Income Tax Assessment Act 1997 (ITAA 1997).

EXPLANATION

Division 28 of the ITAA 1997

3. A taxpayer has to have either owned, leased or hired a car under a hire purchase agreement to be able to claim a deduction under Division 28 of the ITAA 1997. A taxpayer who jointly owned, jointly leased or jointly hired a car under a hire purchase agreement during an income year 'owned', 'leased' or 'hired' the car and can therefore claim a deduction under Division 28.

4. Division 28 applies to a partnership (ie. including an association of persons in receipt of income jointly) as if it were an individual. Therefore, this Law Administration Practice Statement does not apply to a taxpayer who is acting in the capacity of a partner in a partnership.

Deductions under METHOD 1 - Cents per kilometre method

5. The 5,000 kilometre limit applies to a particular taxpayer in relation to a particular car. It does not apply to the car itself. Therefore, each joint owner or joint lessee can claim a maximum deduction of 5,000 kilometres in relation to their income producing use for each income year.

Deductions under METHOD 2 - 12% of original value method

6. The deduction available to a taxpayer under the 12% of original value method is 12% of the cost of the car when they acquired it. Where a car is jointly owned, Subdivision 28-D allows the joint owner a deduction according to their share in the ownership of the car because each joint owner has not "acquired it" - only a share of it. Therefore, each joint owner can deduct their share of 12% of the cost of the car (ie. where two joint owners - 6% each).

Deductions under METHOD 3 - One-third of actual expenses method

7. The deduction available to a taxpayer under the one-third of actual expenses method is one-third of the car expenses they incur (excluding capital expenses) plus one-third of their share of the depreciation.

8. Where a car is jointly owned or jointly leased, expenses may have been incurred wholly by one of the joint owners or jointly with other joint owners. It depends on who has the legal liability for the expenses. A taxpayer who is a joint owner or joint lessee can deduct one-third of expenses wholly incurred by them and one-third of their share of jointly incurred expenses.

9. Where a car is jointly owned, depreciation is shared by the joint owners according to their respective interests in the car. A joint owner who uses the one-third of actual expenses method can deduct one-third of their share of the depreciation.

Deductions under METHOD 4 - Log book method

10. As a matter of practice, the ATO accepts that deductions for joint owners under the log book method are calculated on the following basis:

((Total kilometres travelled by the taxpayer in producing their assessable income / total number of kilometres the car travelled in the period) * total car expenses incurred (individually or jointly) by any of the joint owners plus total depreciation for the car for the period.)

Amendment history

Date of Issue: 29 April 1999

Date of Effect: Ongoing

File NO 99/4924-1; NO 96/9842-6; NO 96/4745-7

Subject References:
common ownership
deductions and expenses
documentation and records
joint interests
joint liability
joint tenancy
motor vehicle expenses
motor vehicle use substantiation
motor vehicles
salary and wages expenses
substantiation
work-related expenses

Legislative References:
ITAA 1997 Div 28
ITAA 1997 Subdiv 28-D

FOI number: I 1018380 Authorised by:
Michael O'Shannassy