End of the Financial year is fast approaching, which means two things in the automobile world.
1. Lots of great deals on offer
2. Time to get your vehicle’s tax deductions in order
We can help with both, but let’s look at the tax deductions for now. You need to know what regulations have changed since last year, what you can claim, and if you’re looking towards FY1617, read on below to find out how to maximise your tax savings next year.
Need To Know For EOFY 15/16
1/3rd and 12% methods are gone
1/3 and 12% methods of claiming deductions have ceased to exist since 1st July 2015. Cents per Kilometre and Log Book methods are all that remain.
Cents per Kilometre changed
Now set at a flat rate of 66 cents/km, capped at a maximum of 5,000 km’s, or $3,300. Although no records need to be kept, the ATO may request evidence on how business kilometres are calculated.
|Year||Cents per Kilometre||Max KM|
*Please Note: A separate claim for depreciation cannot be made if Cents per KM method is applied
Cents per KM (reimbursements by employers):
PAYG withholding rate for car allowance Cents per Km has also been set to 66 cents/km, capped at a maximum of 5,000 km’s, or $3,300. If employers are paying a higher figure yet failing to withhold that amount, it may result in a tax liability for the employee when their tax return is lodged.
No changes to Logbook method
Nothing has changed. You still need to keep valid records for a continuous 12 week period. However, be aware, the ATO has increased the scrutiny placed on driver’s work-related deductions. This is thanks to the greater level of digital records now available and increased data mining and benchmarking capabilities.
Your records need to be watertight and include accurate details of all expenses including fuel, servicing, repairs, insurance, registration, etc
- Depreciation Limit:
‣ Remains – $57,581
- Luxury Car Tax:
‣ Standard – $63,184
‣ Green – $75,375
Need To Know For EOFY 15/16
What can be claimed
The business use percentage of costs* can be claimed on a vehicle owned outright,
under a CHP**, Chattel Mortgage**, finance lease, personal loan or home loan redraw.
*Deductable costs such as depreciation, interest and charges or repayments/rentals will vary depending on finance structure.
** Hire Purchases and Chattel Mortgages require 50% or more business usage.
If there is no business use, the only way to access any tax benefits is with a novated lease.
Sole Trader or Partnerships (that include at least one individual)
- The business use percentage of costs can be claimed on a vehicle owned, leased or financed under a hire purchase agreement. This includes a passenger vehicle, station wagon, 4WD, or most vehicle types designed to carry less than 1 tonne or less than 9 passengers.
- Full deductions are available for vehicles such as a Utes, station wagons or vans that have been modified for business use. Private use is restricted to work commute, and other minor amounts.
Company or Trust
Full deduction for expenses can be claimed on a vehicle owned or leased by a company or Trust. Please Note: FBT may apply if the vehicle is used for private purposes by an owner, director, or an employee of the entity (or their associates). The FBT cost is also tax deductible.
|FBT||End 31st March 2015||End 31st March 2016 & 2017||End 31st March 2018|
|Type 1 Gross Up Rate||2.0802||2.1463||2.0802|
|Type 2 Gross Up Rate||1.8868||1.9608||1.8868|
Need To Know For EOFY16/17
Vehicle depreciation threshold changed
From 1 July 2016, the new depreciation threshold is $57,581, which also affects the maximum amount of GST claimable.
|Up to 30th June 2016||From July 1 2016|
|Max GST credit claimable||$5,224.18||$5,234.63|
Luxury car tax changed
From 1 July 2016, the luxury car tax thresholds change as below. The tax rate remains the same, at 33 cents per dollar above the threshold.
|To June 30 2016||From July 1 2016|
So what does this mean?
If you’re about to buy a passenger vehicle valued above the threshold, wait until after 1st July 2016 and you’ll save $312.84
Need To Know For EOFY16/17
How to maximise your tax deductions next year
No business use for your car?
The only way to access any tax benefits is with a novated lease.
Business use for your car?
- Check out the tax deductions available for novated leasing
- Ensure Logbook method is being used if driving more than 5,000km/pa
- Ensure cents per kilometre method is being used if driving less than 5,000km/pa
- Ensure accurate records are being kept, and no deductions are being missed
If you’re using consumer finance
- Consider commercial finance options, if you have business use
- Consider the benefits available with novated leasing
Sole Trader / Partnership
If you’re not claiming a full deduction:
- Compare the tax deductions available on different finance methods (Download the Essential Guide to Commercial Car Finance here)
- Consider owning the vehicle under a different entity, if a company or a trust is available for example.
- If there is an additional income stream (where you pay tax on the PAYG system) look into novated leasing too
If the vehicle has not been altered for work use and is used predominantly by an employee.
- Consider providing the employee with a car allowance, and the option of a novated lease.
This removes the vehicle from the balance sheet, and depending on the numbers involved, has the ability to reduce an organisation’s payroll tax, and workers’ compensation premiums.*
*Only for some states & territories of Australia
If you’d like to discuss any of this in more detail, or find out how much you could save, click here and we’ll call you back.
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