Frank is the owner of a garden maintenance and landscaping business which servic

Question

Frank is the owner of a garden maintenance and landscaping business which services the Melbourne CBD area. He drives a Holden Victoria Utility he purchased in 2010 at a cost of $32000. It has a 3200-CC capacity engine and it is primarily used or picking up supplies and transporting materials and tools to his various jobs.
Frank was conscientious with his record keeping and for this reason kept a comprehensive log book for the current tax year.
Information included in his log book included the following:
Travel to suppliers and customers — 2300KM
Travel from home to work — 1890KM
Private family travel — 160 KM
Total - 4350KM
Frank's running costs for the year including the decline in value (depreciation) totalled $12800
Required-
(a) Using the information above, calculate the maximum amount that Frank would be able to include as deduction for car expenses for the year from the method available to him.
(b) What other vehicles are treated in the same way as Frank's?

Explanation / Answer

Travel from Home to work is not considered for work related expense. This travel is considered private. Hence 1890 KM travel for travelling from home to work is not to be considered for deduction.

Private family travel of 160 KM cannot be claimed for deduction

Only 2300 KM of travel can be claimed for business expenses.

The size of the engine does not matter after 1 July, 2015.

After 1 July, 2015, there are only two methods of claiming deduction for car expenses

Under the cent per KM method, deduction available is only 66 Cents per KM

Under the logbook method, the deduction can be claimed based on business use percentage.

The calculation by the two methods are given below:

Cents per Km method

         $1,518

(2300*0.66)

Logbook method

         $6,768

(2300/4350)*$12800

The maximum deduction for car expenses Frank can claim=$6,768

(b) If someone uses leased or hired car under hire-purchase agreement can use the above method.

If someone is the de facto owner of the car( even if the car is not registered in his name),he can claim deduction like Frank. A family car gifted but not registered in the business owner’s name can also claim deduction under one of above two methods

Cents per Km method

         $1,518

(2300*0.66)

Logbook method

         $6,768

(2300/4350)*$12800

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