However, in the pursuit of minimising the tax you are required to contribute and maximising any refund due, taxpayers are urged to ensure they have accurate information regarding what they are entitled to claim. 

This year, the Australian Taxation Office (ATO) announced it will be closely examining claims for work-related car expenses as part of a broader focus on work related expenses.

And with good reason.

ATO assistant commissioner Kath Anderson said more than 3.75 million people made a work-related car expense claim in 2016–17, with a monetary worth of around $8.8 billion.

“That’s a lot of money and Australians expect us to ensure people are not over-claiming,” she said. 

“While most people want to do the right thing, we know the rules can be a bit tricky for some and we are seeing a lot of mistakes.

“We are particularly concerned with taxpayers claiming for things they are not entitled to, like private trips, trips they didn’t make, and car expenses their employer paid for or reimbursed.”

Calculating a deduction 

There are two ways to calculate a deduction for car expenses:

The danger of claiming ‘standard’ deductions

Some people erroneously assume they are entitled to claim the maximum amount under the cents-per-kilometre method of determining a work-related car expense.

“It’s legitimate to claim for 5000 kilometres if you did actually do them as part of earning your income,” Ms Anderson said.

“However, we are concerned that some taxpayers mistakenly believe that this is a ‘standard’ deduction they are entitled to, without needing to provide any evidence of having travelled that distance, or even having undertaken any travel at all.

“It’s true that claims of up to 5000 kilometres using the cents per kilometre method don’t require a log book.

“But, you still need to have done the kilometres as part of your job and be able to show how you calculated your claim. For example by keeping a diary of places you have had to drive to for work, and how often.

“The cents-per-kilometre method is there to simplify record-keeping, not to provide a free ride.”

There are no free rides

Don’t double-dip.

You can’t claim expenses you didn’t pay for, such as when your employer provided the vehicle or reimbursed your expenses, including under a salary sacrifice arrangement or novated lease.

And, travelling from home to work is not deductible for most people.

There are a few exceptions: if people travel from site to site or are required to transport bulky tools or equipment and their employer does not provide them with secure storage at work.

Remember, the Australian Taxation Office may request proof that you were required to undertake the travel for work.