The rules for individuals making claims for vehicle expenses (which apply to both employees and non-employees) state that taxpayers are required to substantiate claims for a vehicle that is used for income producing purposes.
Clients should be reminded that unlike other work-related expenses, the $300 substantiation threshold does not apply to claims made for car expenses.
There are two methods to choose from (from the 2015-16 income year) — the log book method, or the cents per kilometre method (currently 68 cents).
For each car used in deriving assessable income, only one of these two methods can be used to substantiate claims in an income year. Each method may or may not result in higher or lower claims, but importantly each has different record keeping requirements.
With regard to the log book method, subsection 28-100(3) ITAA 1997 says: “You must keep odometer records for the period when you held the car during the income year” (our emphasis). It goes on to say: “Subdivision 28-H tells you about odometer records, which document the total number of kilometres the car travelled in that period.”
The subdivision mentioned deals with keeping odometer records for a car for a period. This states that a car’s odometer readings should be made at the start and at the end of the period (us again), with the following information also recorded:
- The car’s make, model and registration number
- The engine capacity expressed in cubic centimetres
Additionally, in regard to the 12-week period, Subsection 28-120(3) ITAA 1997 says: “If you want to use the ‘log book’ method for two or more cars for the same income year, the log books for those cars must cover periods that are concurrent.”