Vehicle Depreciation

Types of Motor Vehicles

The type of motor vehicle you drive can affect how you calculate your claim.

For tax purposes a motor vehicle is either a "car" or an "other vehicle".

Car

A 'car" (for income tax purposes) is a motor vehicle that is designed to carry both a load of less than one tonne and fewer than nine passengers.
Many four wheeled drives and some utes are classed as cars.

Cars are subject to the car depreciation limit - Other vehicles are not.

Only cars (owned by sole traders or partnerships) can use the cents per km method or the 12 week logbook method.

Only cars using the logbook method can estimate fuel costs - other vehicles must use actual costs based on receipts

For "Other vehicles" you cannot use the cents per km method and are not required to keep a complying logbook.
You can use a diary or journal to separate private use from business use.
Claims must be for actual costs for expenses incurred based on receipts.

Cars owned by companies and trusts also cannot use the cents per km method.
Similarly, claims must be for actual costs for expenses incurred based on receipts.

 Other Vehicle

If your Motor vehicle is not a car it's classed as an "other vehicle".
Other vehicles include motorcycles, and vehicles designed to carry either nine or more passengers or designed to carry loads of one tonne or more.

Load carrying capacity can be calculated by subtracting Unladen Vehicle weight (Kerb weight) from Gross Vehicle Weight (GVM).

 1 Tonne =1000kg

Originally for the period 7.30 p.m. 12 May 2015 to 30 June 2017  - extended to 30 June 2018

The immediate write-off for individual small business assets is increased from less than $1,000 to less than $20,000 for businesses with an annual turnover of less than $10 million.

and

The immediate deduction of the balance of the pool if the balance is less than $20,000 at the end of the year, prior to the deduction of the current year’s depreciation amount (ATO says no double dip allowed).

While only the taxable purpose proportion is deductible, the entire cost of the asset must be less than the threshold.

From: 1 July 2012

Small business enterprises (SBE) are eligible to write-off the first $5,000 of any motor vehicle purchased after 1 July 2012.  This measure replaces the Entrepreneur Tax Offset.  The remainder of the purchase price can be transferred into the general small business depreciation pool, which is depreciated at 15% in the first year and 30% in later years.

However if the total cost of an eligible vehicle is less than $6,500 then the whole amount is written off under the general asset provisions.

Refer to the link below for more details.

If the car is ‘owned’ by a business that has elected to use the SBE simplified depreciation rates then the Uniform Capital Allowance rates set out below will not apply.

(1) Assets acquired from and after 10 May 2006 can use a diminishing value rate equivalent to double the prime cost rate.

The car limit is used to restrict depreciation deductions under the income tax law.

The car depreciation limit applies to most cars that exceed the limit including fuel-efficient cars.
 
Exemptions apply for a hearse and some vehicles fitted out for transporting disabled persons.

Example 1

 A taxpayer, who is registered for GST purposes, purchases a car designed mainly for carrying passengers in July 2005.  The car is acquired solely for a creditable purpose.

The car had a purchase price of $77,000.  The car limit for the 2005/2006 financial year is $57, 009.  The first element of the cost of the car ($77,000) is reduced by the input tax credit of $5,182 (1/11 of $57,009) that the taxpayer is entitled to for the acquisition of the car to $71,818.  As this amount exceeds the car depreciation limit, the first element of the cost of the car will be further reduced to $57,009 for car depreciation purposes.

If the business had leased the vehicle the lease payment is not tax deductible.  Instead it is treated as a notional purchase transaction at the luxury car tax threshold.  The lessee claims notional depreciation just as if it was a hire-purchase contract at the luxury car tax threshold.  However, the restricted GST input tax credits are claimed with each lease payment and not as a lump sum up front.  The notional interest deductible is not limited by the Luxury Car thresholds.

 Example 2

The taxpayer referred to in Example 1 purchases another car designed mainly for carrying passengers in July 2005.  The car is acquired solely for a creditable purpose.

The car had a purchase price of $60,000.  The car limit for the 2005/2006 financial year is $57,009.  The first element of the cost of the car ($60,000) is reduced to $54,818 by the input tax credit of $5,182 (1/11 of $57,009) that the taxpayer is entitled to for the acquisition of the car.  As this does not exceed the car depreciation limit, the first element of the cost of the car will not be further reduced under section 40-230.  

From 1 January 2005
You can choose to adopt the Commissioner's determination or to self-assess the effective life.  If you choose to use the Commissioner’s determination, you must then use the shorter of the capped effective life and the Commissioner's determined effective life as set out in the table below.