The most frequent errors made on tax returns when claiming vehicle expenses

Automobile expenses are one of the most frequently claimed tax deductions in Australia, accounting for approximately 40% of all work-related deductions.

If you use your vehicle for business purposes, you are entitled to claim back the associated car costs, but with the ATO cracking down on car-related deductions, it’s critical to understand which deductions are permitted.

Automobile expenses are one of the most frequently claimed tax deductions in Australia, accounting for approximately 40% of all work-related deductions.

If you use your vehicle for business purposes, you are entitled to claim back the associated car costs, but with the ATO cracking down on car-related deductions, it’s critical to understand which deductions are permitted.

Continue reading to learn about the most common errors people make when claiming automobile expenses on their tax return.

Additionally, with an increasing number of people renting their cars to earn additional income, it’s critical to understand what you can claim.

Automobile-related expenses

When you use your own vehicle to perform work-related duties such as:

1. Transporting tools and other necessary equipment for your job.
2. Traveling from home to a secondary location (such as a client’s office) and then returning to your primary location or home
3. Attending meetings, conferences, or other events at the request of your employer
4. Traveling between two distinct places of employment and delivering or picking up items as directed by your employer.

Apart from business-related car use, you can deduct your entire membership fee, as well as some or all of your major expenses such as registration, insurance, servicing, cleaning, depreciation, and fuel.

Common errors made when claiming automobile expenses

1. Making a claim for your normal commute to and from work. This cannot be claimed, even if you perform a minor job-related task, such as picking up the mail.Even if no public transportation is available when you return home after working overtime, this is not a claimable expense.
2. Making a claim for transporting equipment that is not required by your employer. If you cannot demonstrate that this is a requirement of your employer or that there is no secure location to store your equipment at work, it is not claimable.
3. Claiming expenses for a company car or a car acquired through a novated lease. Take care not to ‘double dip’ on automobile expenses. You cannot claim expenses that your employer has already paid for, such as salary sacrificing arrangements.
4. Making claims for expenses without supporting documentation. One of the most frequent errors made by car owners is claiming car costs using the ATO’s cents-per-kilometre method without supporting documentation. You can claim up to 5000 kilometers per year at a cost of 68 cents per kilometer, but this is not a free pass; documentation is required. If you rent your car, the car-sharing platform should be able to provide you with a summary of all miles driven during bookings, making it simple to claim.
5. Failure to claim depreciation Many car owners overlook depreciation when calculating their annual automobile expenses at tax time. If you use your car for work or rent it out, consult your accountant about how to calculate depreciation, as it may increase your allowable deductions by thousands of dollars.
6. If you rent your car, you are not claiming all allowable expenses. Profits earned from car rentals are considered taxable income and must be reported on your tax return. Additionally, you can claim expenses for the portion of your car’s cost that is related to rental activity or a flat fee of 68 cents per kilometre driven by borrowers.
7. Confusing the rules for automobiles and vans. You could be forgiven for being unaware of the distinction, but the ATO has different rules for claiming deductions when renting a panel van, ute, or other small cargo vehicle compared to when renting a car.

How to correct an error on your tax return

The ATO has provided the following information:

If you discover an error or omission in a business or super tax return, activity statement, or statement, you can correct (revise) or amend it.

Several reasons you may need to correct a mistake include the following: • you entered a figure incorrectly;

• you forgot to report some income, a gain, or a deduction;
• you claimed deductions or credits incorrectly or failed to claim them; and
• you had a change in circumstances relating to something you reported after you filed your tax return.

Whatever the reason, you should immediately rectify any error. In some instances, legal time limits apply to correcting errors. You may be subject to interest and penalties if the amendment increases your debt.

We may verify the data you provide before making any changes. If additional information is required, we will contact you or your tax agent.

The procedure for requesting an amendment or revision to correct a mistake varies according to the type of document lodged. Additionally, you may be required to make a voluntary disclosure.

If we have informed you that an audit or review is being conducted, you must notify the tax officer conducting the audit or review of the error.