How to make the most of the tax perks for car sharing
The tax office has just sent out the message that it will focus on income made from peer-to-peer car sharing but the so-called "crackdown" actually benefits those renting their car out when it is not in use.
When you do the sums, almost everyone who shares their car will now get more cash back at the end of the year.
I'm not sure why it's being calling it a crackdown, as it seems the tax office will actually be handing money back to many people who rent out their car. This is great news for car sharers.
People sharing their car now have clarification from the ATO on exactly which expenses they can claim on their vehicle.
The biggest thing is that it has confirmed sharers can claim expenses at the business rate of 66 cents for each kilometre that their car is driven by borrowers, going up to 68 cents in the 2018-19 tax year.
The tax benefits of this are significant.
On average our users earn $300-$400 a month to offset their car's costs.
Everyone's situation is different - for example, some people use their car a lot for their own personal use, some not at all - but we think that most car sharers will be a few hundred dollars ahead at tax time if they start claiming the full allowable deductions. Some of our high earners may get thousands back now that they know about all of the expenses they can claim.
Comprehensive insurance for your car can cost $1000 or more a year, which is usually not tax deductible. When you rent out your car you pay $720 a year as a membership fee, and this replaces your insurance. So your car insurance becomes a tax deduction.
The most significant saving is likely to come from people claiming the depreciation on their car. Most people have no idea how much their car actually depreciates each year and so they just haven't been claiming anything.
The ATO has a simplified method for working this out which we think will lead to many people claiming more at the end of the year.
Car sharing expenses you can claim
Car owners can claim the full membership fees charged by the car-sharing platform, as well as any car expenses that directly relate to sharing your car.
It's important to get advice from a qualified accountant or tax agent but according to the ATO there are two ways to calculate these expenses:
- claim at a flat rate of 66 cents per km (or 68 cents in the 2018-19 tax year) for each kilometre driven by borrowers, up to 5000km in total; or
- add up the actual costs incurred under the car sharing agreement, and work out what proportion relates to personal versus car sharing use.
If you're using the "actual costs" method, you can deduct all of the car expenses that directly relate to renting out your car. In most cases, you will also use your car for personal use. This means you need to apportion any car expenses between personal and income-producing use.
The costs you can claim include:
Membership fees: Car owners can claim the full fees that they are charged by their car-sharing platform.
Car running costs: The portion of fuel, tyres and servicing, cleaning, maintenance and repairs that relate to your income-earning kilometres.
Registration: A percentage of your annual registration fee, in proportion to your car's rental use.
Insurance: Comprehensive insurance may be included in your membership fee but if you pay for any additional insurance for your car sharing activities you can claim a portion of that.
Depreciation: This is a huge "hidden" cost that most car owners are not aware of. The ATO has published some simplified rules for working out the depreciation on cars.
Finance costs: If you have taken out a loan for your car, you'll be able to claim some of the repayments and interest costs in proportion to the car's rental use.