Employees who use their motor vehicle for work related travel are entitled to a tax deduction for the costs incurred. The two methods available for calculating the deduction are the ‘cents per kilometre’ method, or the ‘log book’ method.
Under the ‘cents per kilometre method’, a set rate is applied to each work or business kilometre the motor vehicle travelled, up to a maximum of 5,000 business kilometres per year. For example, the set rate for 2016 is $0.66 cents per kilometre. The advantage of this method is that the taxpayer does not require written evidence of their motor vehicle expenses, only records to make a reasonable estimate of business kilometres travelled during the year.
Under the ‘log book’ method the taxpayer estimates the work or business use percentage of their motor vehicle and applies it to the allowable motor vehicle expenses incurred during the income year. The business use percentage is worked out from log books and odometer records. The log book must cover a 12 week continuous period and record all the work or business related trips and kilometres travelled. All motor vehicle expenses, except for fuel and oil, must be evidenced by receipts.
A deduction is generally allowed for the cost of travelling directly between two unrelated places of work where the taxpayer does not reside at either workplace. For example, an employee travelling to an office, doing some work, before travelling to a second branch office, would be allowed a deduction for the travel between the two offices. The employee’s travel to the first office and from the second office home again, would still be private non-deductible travel.