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Claiming A Tax Deduction For A Commercial Vehicle

Claiming A Tax Deduction For A Commercial Vehicle

For many Australian business owners, commercial vehicles are the lifeblood of many operations.

But did you know that beyond the initial purchase cost, there’s a hidden benefit: tax deductions?

Understanding what deductions you can claim for your commercial vehicles can make a significant difference.

This blog will help businesses understand tax complexities and give them the correct knowledge to claim their rightful deductions and maximise their tax savings.

What Are Commercial Vehicles And How Are They Categorised?

In Australia, commercial vehicles are classified based on their size, weight, and intended use. This classification system is crucial for not only taxation but also registration and regulations. 

Here’s an overview of the main categories:

  • Light Commercial Vehicles (LCVs): Utes, vans, and small trucks typically used for deliveries, tradie work, and light haulage.
  • Heavy Commercial Vehicles (HCVs): These are – larger trucks, articulated vehicles, and machinery used for heavy haulage tasks.
  • Business Passenger Vehicles: Regular cars are used primarily for business purposes, such as sales calls or visiting clients.
  • Specialised Vehicles: Vehicles designed for specific tasks, like concrete mixers, mobile cranes, or taxis.
  • Rental Vehicles: Vehicles you lease or rent for short-term business needs.
  • Government and Non-Profit Vehicles: Vehicles owned and operated by government agencies or not-for-profit organisations.

Common Commercial Vehicle Tax Deductions

Now, let’s get down to the main agenda – the deductions you can claim!

Here are some of the most common expenses you can offset against your taxable income:

Deductible Expense Description
Fuel and Oil The cost of keeping your commercial vehicles running.
Repairs and Servicing Maintenance expenses to keep your vehicles in top condition.
Interest on Loans If you financed the purchase of your commercial vehicle, the interest you pay can be deducted.
Lease Payments Lease payments for vehicles used solely for business purposes are generally fully deductible.
Insurance Cover Premiums The cost of comprehensive, third-party property, or other relevant insurance for your commercial vehicles.
Registration Annual registration fees for your commercial vehicles.
Depreciation The decline in value of your commercial vehicle over time. There are different methods to calculate depreciation, so consulting with your accountant is recommended.

Top Tips For Maximising Your Commercial Vehicle Deductions

Knowing the deductions available is just the first step.

Here are some expert tips to help you maximise your claims:

  • Choose Wisely: Select vehicles classified as “commercial vehicles” whenever possible. These typically offer more significant tax benefits compared to regular cars.
  • Claim Depreciation Strategically: Talk to your accountant about depreciation methods like diminishing value or prime cost to maximise deductions for your vehicle’s declining value.
  • Maintain Record: Maintain meticulous records of all your vehicle-related expenses. Receipts, invoices, and detailed logs are crucial for substantiating your claims.
  • Track It Right: The method you use to track expenses depends on your business structure and vehicle type.

Tracking And Calculating Vehicle Expenses

Cars: You can use either the cents per kilometre method (a set rate per business kilometre travelled) or the logbook method (recording details of each business trip).

Other Vehicles: For vehicles other than cars, you must use the actual costs method, which involves keeping receipts for all business-related expenses.

Here is a table for easy reference:

Vehicle Type Tracking Method Options Description
Car Cents per Kilometre Method A set rate per business kilometre travelled.
Car Logbook Method Record details of each business trip in a logbook.
Other Vehicles Actual Costs Method Keep receipts for all business-related expenses.
Remember: The ATO (Australian Taxation Office) may request proof of your calculations, so maintaining proper records is essential.

Key Considerations To Know Before You Claim Tax Deductions For A Commercial Vehicle

  • Consider Leasing: Leasing a vehicle can offer some tax advantages compared to purchasing. Leasing payments may be fully deductible if the vehicle is used solely for business purposes.
  • Fuel Tax Credits (FTCs) Can Help: Businesses that use vehicles for long distances may be eligible for FTCs, which can offset fuel excise or customs duty. Keep detailed fuel records and consult your accountant for claiming guidelines.
  • Employee Contributions for Personal Use: If you allow employees to use company vehicles for personal trips, consider implementing an employee contribution scheme. This allows employees to contribute towards the cost of using the vehicle for personal purposes, reducing their fringe benefits tax (FBT) liability.
  • Fringe Benefits Tax (FBT): FBT is a tax levied on certain benefits provided by employers to employees. Understanding FBT rules around commercial vehicles is crucial. Vehicles primarily used for business are generally exempt from FBT. However, personal use of company vehicles can trigger FBT liabilities. 

How Tax Advisors At KPG Taxation Can Help You Claim Tax Deductions For Your Commercial Vehicle?

Owning commercial vehicles can be a big advantage for your business, but tax time can be confusing. This blog gave you the lowdown on what commercial vehicles you can claim deductions for and the common expenses you can offset against your taxes.

Now that you know the basics, don’t get stuck in the mud with the finer points! There can be a lot to consider, like depreciation methods, record-keeping, and employee use. The tax accountants at KPG Taxation can help you handle the process smoothly.

We can answer your questions about:

  • Choosing the right vehicle classification to maximise benefits
  • Depreciation strategies to get the most out of your deductions
  • Keeping proper records to prove your claims
  • Following the rules for employee use of commercial vehicles

Don’t miss out on valuable tax savings! Contact KPG Taxation today. Our friendly team will guide you through the process and help you claim every deduction you deserve.

Consulting with KPG Taxation

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