Small Business Start Up Finances Guide

Step 8 – Motor vehicle deductions

Although these are part of the above, we have put them into a separate category due to the often significant amounts involved.

As the Tax Office explains, there are different rules here if you operate as a company versus a sole trader or partnership. (This is one of the reasons why we suggest you consider a company structure).

http://www.ato.gov.au/Business/Deductions-for-business/Motor-vehicle-expenses/

If you are a sole trader or partnership AND your vehicle is NOT as follows:

“a truck or van, or a smaller vehicle, such as a ute, wagon or panel van that has been heavily modified for business use, or where private use is restricted to home-to-work travel and very minor other use.”

Then you have 4 choices for claiming a tax deduction:

http://www.ato.gov.au/Business/Deductions-for-business/Motor-vehicle-expenses/Calculating-your-deduction/

The Tax Office has a great tool here for working out the deduction you will get based on each of the 4 options:

http://www.ato.gov.au/Calculators-and-tools/Work-related-car-expenses/

The tool is basically set up so that you can check your entitlements after the end of the tax year.

But we suggest you use it in a different way by checking which method is going to give you the biggest deduction for the coming year (and then working out what records you need to keep). In order to do that, just follow the steps but when you get to the question below, click on ALL the listed records in the first box shown:

One of the methods that often provides the biggest tax deduction is called the ‘logbook method’.

The idea of keeping a logbook sometimes turns people off but its not as hard as it looks. Just buy a yellow logbook from a newsagency, keep it in your car and take 10 seconds to fill it in when you finish each trip. Done

(For some people this could be the best return on your time that you will ever get.)

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