Edited version of your written advice

Authorisation Number: 1012817650396

Ruling

Subject: Work-related motor vehicle expenses

Question 1

Are you entitled to a deduction for travel between your home and place of work?

Answer:

Yes

Question 2

Are able to utilise the logbook method in calculating your work-related car expenses?

Answer:

Yes

This ruling applies for the following period(s)

Year ended 30 June 2014

The scheme commences on

1 July 2013

Relevant facts and circumstances

You are required to carry bulky tools (tool box, power tools etc.) in excess of 40 kilograms to and from work.

Your employer has confirmed that there is no secure lock-up on site that is available for you to use to store the bulky tools.

You own a car which you use to transport the bulky tools.

You have provided a copy of a logbook that shows the odometer readings at 1 July 2013 and 30 June 2014.

The logbook contains trip details in excess of a continuous 12 week period within the 2013-14 financial year and provides:

• odometer readings at the start and end of the period

• total kilometres travelled in the period

• a calculation of your percentage business and private use for the period

• amount of kilometres travelled each day between home to work and work to home

You have provided written substantiation of various expenses incurred in relation to the vehicle (registration, insurance and repairs).

You have estimated fuel costs based on odometer records (as shown in your log book) and an average cost per litre for fuel (based on a sample of receipts).

You have provided a calculation (based on the car purchase contract and loan agreement) of interest expenses incurred on money borrowed to purchase the car.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

Reasons for decision

Work-related deductions

Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income, except where the outgoings are of a capital, private or domestic nature.

Bulky tools

A deduction is generally not allowable for the cost of travel between home and work as it is considered to be a private expense. Expenditure incurred in travelling to work is a prerequisite to the earning of assessable income rather than being incurred in the course of producing that income. That is, the duties of an employee do not commence until the arrival at a place of work and will cease upon departure from work. The essential character of the expenditure is of a private or domestic nature, relating to personal and living expenses and therefore not an allowable deduction. (Lunney v FCT (1958) 100 CLR 478).

The fact that the travel may be outside normal working hours, or involves a second or subsequent trip, does not change the above principle.

However, a deduction may be allowed for home to work travel expenses in certain exceptional circumstances, for example:

• the employees home constitutes a place of employment and travel is between two places of employment,

• the employees employment is inherently of an itinerant nature, and

• the employee has to transport by vehicle bulky equipment necessary for employment.

Of relevance to your situation is the third point, transporting bulky equipment

As stated in Taxation Ruling TR 95/19, a deduction may be allowable if the transport costs can be attributed to the transportation of bulky equipment rather than to private travel between home and work.

If the equipment is transported to and from work as a matter of convenience or personal choice, it is considered that the transport costs are private and no deduction is allowable.

A deduction is not allowable if a secure area for the storage of equipment is provided at the work place (Case 59/94 94 ATC 501; AAT Case 9808 (1994) 29 ATR 1232)).

Furthermore, the equipment must be bulky and used in the earning of assessable income.

In your case, based on the information provided, it is accepted that the equipment you use in the performance of your duties is bulky and not easily portable. Further, there is no secure facility at your workplace that is available for you to use to store the equipment.

Accordingly, a deduction will be allowable for the motor vehicle costs attributed to the transportation of the bulky equipment between your home and work.

Logbook method

You can choose one of four methods to work out your car expenses. If you qualify to use more than one method, you can use whichever gives you the largest deduction or is most convenient. These methods are:

• cents per kilometre

• 12% of original value

• one-third of actual expenses

• logbook.

With the log book method, your claim is based on the business use percentage of the expenses for the car.

Expenses include running costs and decline in value but not capital costs, such as the purchase price of your car, the principal on any money borrowed to buy it and any improvement costs.

You can claim fuel and oil costs based on either your actual receipts or you can estimate the expenses based on odometer records that show readings from the start and the end of the period you had the car during the year.

You can claim a deduction for the decline in value of the car only if you owned it or hired it under a hire-purchase agreement and you must use either the 'one-third of actual expenses' or the 'logbook' method.

You need written evidence for all other expenses for the car.

To work out your business use percentage, you need a logbook and the odometer readings for the logbook period.

Your business use percentage is the percentage of kilometres you travelled in the car for work during the year divided by the total kilometres travelled by the car during the year.

If the pattern of your car use changed during the year, make a reasonable estimate of your business use percentage for the whole of 2013-14, taking into account your logbook, odometer and other records, any variations in the pattern of use of your car and any changes in the number of cars you used in the course of earning your income.

Your logbook is valid for five years. If this is the first year you are using this method, you must have kept a logbook during 2013-14. It must cover at least 12 continuous weeks.

Your logbook must show:

• when the logbook period starts and ends, and the odometer readings at these times

• the total number of kilometres the car travelled during the logbook period

• the number of kilometres travelled for work during the logbook period based on the journeys recorded for the period

• the business use percentage for the period.

Entries in the logbook for each business trip must be made at the end of the journey (or as soon as possible afterwards) and show the:

• date the journey began and ended

• odometer readings at the start and end of the journey

• kilometres travelled on the journey

• reason for the journey.

Your records must also show the make, model, engine capacity and registration number of the car.

In your case, based on the information provided, you have kept the records/documentation that is necessary to be eligible to claim the business use percentage of the expenses for the car under the logbook method.