Tax Return:: 2024FY Car Expenses Tax Deduction (Cents per Km Method Rate Change)

Hello, this is your tax accountant, P&C Tax Professionals.

As we head into a new financial year, individuals and businesses alike are gearing up to assess their expenses and maximise their tax deductions. One area that often garners attention is car expenses, which can significantly impact one’s tax refund or liability. In particular, the cents per km method for claiming car expenses is undergoing changes for the 2024 financial year. Understanding these adjustments is crucial for taxpayers looking to optimise their tax benefits while staying compliant with regulations.

<How to calculate your car expense deductions for your tax return>

There are 2 options available for you to account for your car expense tax deduction on your tax return:

1.    The cents per km method

2.    The logbook method

If you’re claiming car expenses for multiple vehicles, you have the flexibility to use a different method for each vehicle. Additionally, you can choose to change the method you use for the same vehicle in different income years.

<Cents per km method>

To determine your deduction using this approach, simply multiply the number of kilometres driven for work-related purposes by the applicable rate per kilometre for the given income year. “Work-related kilometres” refer to the distance travelled by your car while generating assessable income.

·        Apply the rate corresponding to the income year for which you’re claiming the deduction:

o   For 2024FY: 85 cents/km

E.g., If you travelled 2500 km during the 2024 financial year (1 July 2023 – 30 June 2024), your car expense deduction will be calculated as:

2500 km x 0.85 = $2125

o   For 2023FY: 78 cents/km

o   For 2021FY and 2022FY: 72 cents/km

·        You’re eligible to claim a maximum of 5,000 work-related kilometres per vehicle. This means for the 2024FY, the maximum amount you could claim as your car expense tax deduction is $4250. 

·        It is essential to maintain records demonstrating how you computed your work-related kilometres.

If you have a joint owner who also uses the vehicle for separate income-generating purposes, each of you can claim up to 5,000 work-related kilometres.

The cents per km rate encompasses all car-related expenses such as:

·        Decline in value (depreciation expenses)

·        Registration

·        Insurance

·        Maintenance

·        Repairs

·        Fuel costs

Therefore, when calculating your car expense deduction using this method, you cannot include any additional expenses related to your car as a separate amount.  

<Record-keeping for cents per km method>

When using the cents per km method, receipts are not required. However, you must be able to demonstrate ownership of the vehicle and provide documentation on how you have calculated your work-related kilometres. For instance, keeping a diary to record your work-related trips would suffice.

In conclusion, as we adapt to these adjustments, it’s crucial that we stay informed, keep meticulous records, and seek professional advice when needed to get the most out of the tax benefits that are available to us. If you have any further questions regarding your tax or super affairs, please feel free to reach out to us through our official Facebook Page (P&C Tax Professionals – Australia) or send your enquiry to our email address (pnctax@naver.com) at your earliest convenience.  

Thank you and bye for now!