Being self-employed can be tough – but it does have its advantages. One of those advantages is the possibility of being able to allocate some of your costs to business expenditure, so you reduce your tax bill. That includes your home office, your phone, and your vehicle.
Dividing up personal use and business use
If you use your car for work-related trips, some of the running costs can be allocated as a business expense.
The situation is simple for a vehicle that is only used for your business: all the costs of running and maintaining it are a business expense and are tax deductible. For example, company vehicles that stay at HQ and are only driven to job sites; or a van you only drive when you’re doing deliveries.
In most cases, though, our self-employed clients use their vehicles for a mixture of work and personal trips. They might drive to work during the week, then take the kids to football at the weekend, all in the same car. If that sounds familiar, you’ll need to keep track of which trips are for work and which ones are personal, so you can allocate costs correctly.
Keeping track of costs
To be accurate, you’ll need to keep a logbook. They’re super-simple these days, because you can download an app on your phone.
If you don’t keep a logbook, the most you can claim is 25% of running costs. So it’s worth logging your trips if you think more than a quarter of them are work-related.
You should also keep records of:
fuel spending
maintenance costs
your Warrant of Fitness and rego expenses
insurance
and parking.
You don’t need to hold onto a physical invoice - just a digital ‘paper’ trail will do the job. Answering your questions about vehicle expenses You can read more about claiming on vehicle expenses here, or you can get in touch and we can provide you with advice. Some of the most common questions we get asked are whether it’s worth keeping a logbook (we can quickly figure that out), how much deduction you can get (we’ll run the numbers) and what happens when your payments are mixed up across business and personal accounts (happens all the time!). So give us call, drop us a note or pop in – we’re here to answer all your tax questions.