Owners of commercial rental properties in Australia can claim tax deductions for travel expenses, including motor vehicle costs, incurred in managing and maintaining their properties. This includes travel for activities such as property inspections, maintenance, and rent collection. It’s important to note that these deductions are not available for residential rental properties, following legislative changes effective from 1 July 2017.
Substantiation Requirements:
When claiming motor vehicle expenses, proper record-keeping is essential. The Australian Taxation Office (ATO) recognizes two primary methods for calculating and substantiating these expenses:
- Cents per Kilometre Method:
- Eligibility: This method applies to cars defined as motor vehicles designed to carry a load of less than one tonne and fewer than nine passengers.
- Calculation: Multiply the total work-related kilometres travelled by the set rate per kilometre (e.g., 88 cents per kilometre for the 2024–25 income year).
- Limit: You can claim up to a maximum of 5,000 work-related kilometres per car per year.
- Record-Keeping: While detailed records of each journey are not required, you must be able to demonstrate how you estimated your work-related kilometres, such as through diary entries or similar documentation.
- Logbook Method:
- Eligibility: Suitable for those who use their vehicle for both rental and private purposes.
- Requirements: Maintain a logbook for a continuous period of at least 12 weeks, recording:
- Date of each journey.
- Odometer readings at the start and end of each journey.
- Total kilometres travelled.
- Purpose of the journey.
- Calculation: Determine the rental-use percentage by dividing the business kilometres by the total kilometres travelled during the logbook period. Apply this percentage to your total vehicle expenses, including fuel, maintenance, registration, insurance, and depreciation.
- Validity: A logbook is valid for five years, provided there are no significant changes in the vehicle’s usage pattern.
Commercial Vehicles:
For vehicles not classified as cars (e.g., those designed to carry loads of one tonne or more, or more than nine passengers), the logbook method is typically used to substantiate expenses. In such cases, all expenses must be supported by actual receipts, and a logbook should be maintained to determine the business-use percentage.
Conclusion:
Proper substantiation of travel and motor vehicle expenses is crucial for owners of commercial rental properties seeking tax deductions. Maintaining accurate records, whether through the cents per kilometre method or the logbook method, ensures compliance with ATO requirements and maximizes deductible expenses.
Need help claiming all eligible travel expenses for your commercial property? Talk to us today.
