The increase in fuel prices have definitely had a negative reaction from most people. Taking the positives from everything, this could be a chance to increase your motor vehicle expenses to reduce your taxable income. Here’s how:
From 1 July 2022, the cents per kilometre rate increases to 75c per kilometre of work related travel. That means you can have a maximum deduction of $3,750 without a logbook. The institute of Chartered Accountants is contesting this to increase the deduction further, we will be waiting to see if they have any progress on it.
The logbook method may allow you to have a larger deduction for operating your vehicle for your personal work and also your business. Getting a logbook to track how much driving is work related for 12 weeks will increase your chances of getting a larger deduction. If the business related deductions are greater than $3,750, then it is worthwhile to use this method to increase your deductions. It is definitely a great time to re assess this with the current increase in fuel prices.
For businesses, remember that there are GST credits for certain motor vehicle expenses. Fuel is one of them, so the increased price in fuel also means higher GST credits.
Stay on top of your deductions leading up to tax time, preparing early will ensure you have the best tax outcome for the financial year!