Work related car expenses have fallen under the ATO’s radar. It’s no surprise when over 3.75 million people made a work related car expense in the 2017 tax year, totalling $ 8.8 billion.

The ATO’s concerns are focused on the following:

• Claiming for things they are not entitled to, eg. private trips;
• Claiming for trips they never made; or
• Car expenses that they have already been reimbursed for by their employer.

There is also the misconception that claims for the 5,000 km using the c/km travel are a “standard deduction” with taxpayers believing that they are entitled to the deduction without having to provide any evidence of having travelled that distance, or even having to undertake any travel at all.

While you do not need to keep a logbook if you are using the cents per km method, you do need to:

• Have done the kilometers as part of your job; and
• Be able to show how you calculated your claim;

The cents per km method is there to simplify record keeping, not provide a standard deduction for everyone.

Improvements in technology and data analytics have made it easier for the ATO to identify claims that are unusual. Taxpayers are compared to others in similar occupations earning similar incomes. It is now easier for the ATO to identify people claiming things like home to work travel, or trips not required as part of your job. Travel from home to work is not a deductible expense, however far from the workplace you may live. The ATO may request proof that you were required to undertake the travel for work and one way to check this is to ask yourself if your employer required you to do that travel as part of your duties.

There are three golden rules to remember to ensure that you get your claim right:

• You have spent the money yourself and haven’t been reimbursed by your employer;
• The claim must be directly related to earning your income; and
• You need a record to prove it.

Contact AWT Accountants on 9303 8900 or clientlink@awtaccountants.com.au for assistance.