What to do if the ATO takes a closer look at your mileage claims
Is it worth thinking about?
Don't rule it out. The tax office has warned it will be a key area it's focusing on as we lodge this year's returns.
While many people can legitimately claim costs associated with using their car for work purposes, the ATO is concerned that some are claiming things they shouldn't or over-inflating their claims to get a bigger refund.
It says it will be using data analytics to trawl through tax returns and identify questionable claims. One danger sign is someone claiming more than other taxpayers on similar incomes in similar jobs.
If your number comes up, it will contact you for more information on how you worked out your claim. If it thinks it is warranted, it says it may also contact your employer to ask whether you were required to use your car for work-related travel.
Common problems include taxpayers claiming for private trips, trips they didn't actually make and expenses an employer has already reimbursed them for. You can't claim travel to and from work unless your employer requires you to transport bulky equipment.
The tax office says dodgy claims it uncovered in 2018 included:
- A retail worker who claimed $350 for what turned out to be the cost of public transport to and from work.
- An office worker who claimed $3300 for 5000 kilometres of work-related travel under the cents-per-kilometre method. Again, the travel was to and from work.
- A taxpayer who claimed $4800 using the logbook method. When asked to substantiate the claim it turned out the taxpayer had used the car service logbook and hadn't kept a logbook showing work-related travel as is required. It turned out they hadn't undertaken any work-related car travel during the year.
Play it safe
To stay on the right side of the tax office, stick to claims for genuine work-related travel and be prepared to show how you calculated the amounts claimed.
In 2015, the federal government reduced the methods for calculating car expenses to two options.
The simpler cents-per-kilometre method allows you to claim a set rate (currently 68c) for each kilometre of work-related travel, up to a maximum of 5000 kilometres a year. You don't need to keep receipts or a logbook, but while that might sound attractive it's not trouble free.
The tax office says one in five people using this method claims the full 5000 kilometres. But on closer inspection it has found many of them can't show how they've arrived at this figure and have had their claims reduced or disallowed.
It says you need to be able to explain how you worked out your business kilometres, ideally through something like diary entries that show when you made the trip, how far it was and what it was for.
The logbook method allows bigger claims, but it requires more paperwork. You need to keep a logbook for 12 continuous weeks during the financial year showing the car's odometer readings at the start and end of the period, how many kilometres you travelled, the reason for each of your business journeys and the proportion of business use over the period.
The good news is you only have to do this once every five years but for the next four years you'll need to keep odometer readings at the start and finish of the period you're claiming (that is, the start and end of the financial year if you're using your car continuously) and the percentage of business use based on your logbook.
You also need to keep receipts for expenses such as registration, insurance, servicing, lease payments or interest charges and fuel (though you can use a reasonable estimate based on your odometer readings for that one). The tax office says you should also
be able to show how you calculated any depreciation claimed on the car.
There is a myDeductions tool in the ATO app that can track trips using GPS, a point-to-point calculation or the odometer readings, which can be sent directly to your tax agent or uploaded into myTax at the end of the year.