ATO Interpretative Decision
ATO ID 2002/160 (Withdrawn)
Car Expenses - cents per kilometre - business kilometres exceed 5000
FOI status: may be released
||This ATO ID is a straight application of the law and does not contain an interpretative decision.
||This document has changed over time. View its history.
Status of this decision: Decision Withdrawn 11 November 2005
|CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.|
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Can a taxpayer, who travels more than 5000 kilometres for business purposes, calculate their car expense deduction using the 'cents per kilometre' method under Subdivision 28-C of the Income Tax Assessment Act 1997 (ITAA 1997)?
Yes. A taxpayer who travels more than 5000 kilometres for business purposes can calculate their car expense deductions using the 'cents per kilometre' method under Subdivision 28-C of the ITAA 1997, however the number of kilometres used in the calculation of the expense is limited to 5000.
The taxpayer uses their car for business purposes during the 2001 income year.
The taxpayer travelled 6000 business kilometres in the 2001 income year.
The taxpayer owns their car.
The capacity of the ordinary (non rotary) engine of the taxpayer's car is 2.0 litres.
Reasons for Decision
Division 28 of the ITAA 1997 sets out the rules for working out a taxpayer's deduction for car expenses.
Section 28-12 of the ITAA 1997 states:
'(1) If you owned or leased a car or hired a car under a hire purchase agreement, you can deduct for the car's expenses an amount or amounts worked out using one of the four methods.
(2)You must use one of the 4 methods unless an exception applies. If you can't use any of the methods, you can't deduct anything for the car expenses.'
The four statutory methods of calculating deductions are:
- 'cents per kilometre' method (Subdivision 28-C of the ITAA 1997)
- '12% of original value' method (Subdivision 28-D of the ITAA 1997)
- 'one-third of actual expenses' method (Subdivision 28-E of the ITAA 1997)
- 'log book' method (Subdivision 28-F of the ITAA 1997).
Section 28-25 of the ITAA 1997 provides that under the 'cents per kilometre' method, the taxpayer can calculate their deduction by multiplying the number of business kilometres the car travelled in the income year by a number of cents based on the car's engine capacity as specified in Schedule 1 to the Income Tax Assessment Regulations 1997.
However subsection 28-25(2) of the ITAA 1997 provides that only the first 5000 business kilometres can be used. The kilometres in excess of 5000 must be discarded. Business kilometres are kilometres the car travelled in the course of producing their assessable income and the taxpayer can calculate them by making a reasonable estimate.
Under the 'cents per kilometre' method the taxpayer does not need to substantiate the car expenses for their car (section 28-35 of the ITAA 1997).
The 'Cents per kilometre' rates for the 2000/2001 income year are:
|Ordinary car - engine capacity
||Rotary engine car - engine capacity
||Cents per kilometre
|Not exceeding 1600cc (1.6 litre or less)
||Not exceeding 800cc (0.8 litre or less)
|1601cc-2600cc (1.601 litre- 2.6 litre)
||801cc -1300cc (0.801 litre- 1.3 litre)
|Exceeding 2600cc (2.601 litre or over)
||Exceeding 1300cc (1.301 litre or over)
The taxpayer's deduction using the cents per kilometre method is calculated using the following formula:
( Number of business kilometres travelled x appropriate cents per km rate ) / 100
The taxpayer is entitled to a deduction calculated as follows:
(5000 * 58.5) / 100 = $2 925
Date of decision: 3 January 2002
|Year of income:||30 June 2001|
Income Tax Assessment Act 1997
Income Tax Assessment Regulations 1997
Motor vehicle expenses
Motor vehicle use substantiation
Siebel/TDMS reference number: Hypothetical
Business line: Small Business/Individual Taxpayers
Date of publication: 8 February 2002
|ATO ID 2002/160 history