Cars, Tradies and Tax Deductions! Something so simple can at the same time be so complex, I thought I would write this article after a meeting I had recently with a new client. Please note this is a pretty brief explanation of the relevant laws. If you want more details please come in for a chat.
The client in questions was a young apprentice carpenter who had their tax return done elsewhere last year, on last years return they had claimed 5000km of car use via the “cents per km” method giving them a claim of $3300 and had been told very clearly this was the maximum claim they could possibly claim.
A bit more about the client and their car – as many tradies do he was doing a lot of kms – around 40,000 ks per year. His car was a Hilux 4wd with tool chest on the back as well as ladder racks. He mostly did framing work so generally had compressor, saws, ladders etc that you need to do framing work. Doing this would have cost over $5000 a year in fuel, plus the fact a perfectly good vehicle is being used (and destroyed) which gives you some idea that a claim of $3300 is ridiculous.
So what could be claimed;
- Fuel
- Cost or running the vehicle like servicing, tryes, repairs.
- Insurance
- RACV or other road side assistance
- Cleaning
- The cost of the vehicle itself (either 100% in year one or broken up over a few years – the cars effective life)
- The cost of finance if there is a loan on the vehicle
- Extras added to the vehicle including ladder racks and specific work related additions but in most cases other extras like winches, lift kits, bar work etc will also be claimable.
Why could he claim all this?
There are 2 main reasons or areas of law this comes under;
Commercial vehicle – in many cases if you have a commercial vehicle like a commercial Van, or commercial Ute / truck you can claim 100% of the relevant expenses. End of story, why? Because a VW transporter with 2 seats in the front and the back filled with tools and bits and the associated tools of your trade in the back is not a pleasure vehicle! (please note there are some technical points around dual cab utes)
Heavy tools and equipment – Even if you are not running what is described as a commercial vehicle under the law you may be able to claim 100% of the use of your vehicle if you are working in the trades. The reason is anytime you have heavy or bulky tools and equipment in your car you can claim your trip. In a lot of cases this means you can claim every bit of use of your car as many tradies have their tools in the back all the time.
If you would like more information about this or would like to discuss your tax needs please get on contact. You can contact us here