Late SMSF Tax Returns
Motor vehicle expenses for small business: Things you need to know or else a claim may not be allowed
It is a well know fact that motor vehicle expenses that are incurred as part of the everyday running of a business can be claimed as a deduction. However, as with everything, there are rules governing this aspect of a business tax deduction too. Though it may sound simple, if you do not follow some simple rules such as maintaining a log book and having the title and loan under the business entity’s name, you may miss out on valuable and readily allowable tax deductions from the use of motor vehicle.
If the vehicle is used for both personal and business trips, a logbook or a diary can be used to separate the trips so that the deduction can be calculated correctly. This is because only business trips are tax deductible. A logbook has to be maintained for at least 12 continuous weeks and this should be valid for 5 years, unless the business changes. Trips made between work and home cannot be claimed as they’re considered private trips, however, trips made between workplaces can be claimed as a deduction. If an employee uses a company vehicle for private use, the business may have to pay a fringe benefits tax and this will also be tax deductible.
The title of the motor vehicle plays an important role too. The title should be held by the business entity. In certain cases, a personally owned motor vehicle may be allowed by the tax office to be used for business; however it is always advisable that a business vehicle is owned by the entity operating the business. This forms an important part of being able to claim deductions pertaining to interest, depreciation and asset write-offs.
Some common types of motor vehicle expenses that can be claimed:
- Fuel
- Repairs and servicing
- Interest on motor vehicle loans
- Lease payments
- Insurance
- Registration
- Depreciation
If you run a business through a family trust, you can also claim the costs of running a vehicle, however depending on whether you choose to be an employee of the business or just receive a share of the net income will determine where you can claim the running costs of the vehicle. If you are an employee, you may be able to claim the costs as a deduction against your employment income. If you are not an employee of the business but you are earning trust distribution income, you might be able to claim the deductions against the trust distribution income.
We at A One Accountants have plenty of experience in preparing small business tax returns. We can ensure that all of the deductions you may be eligible for are correctly claimed and we can help you minimise your tax liabilities and make sure you retain the highest return possible. If you are not sure how to calculate or claim your deductions or you want to learn more about motor vehicle taxation claims, give us a call on 0386091889 or send us an email to info@a1accountants.com.au and one of our friendly staff will be happy to help you. All contents of this article are general in nature and you should seek advice pertaining to your personal circumstances.
Related posts
