This Division sets out the rules for working out deductions for car expenses if you own or lease a car or hire a car under a hire purchase agreement.

(1) This Division applies to an individual.

(2) It also applies to a partnership that includes at least one individual, as if the partnership were an individual.

(3) It does not apply to any other entity.

(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 4 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.

(1) A car expense is a loss or outgoing to do with a *car.

(2) In addition, any of the following is a car expense:

(3) None of the following is a car expense:

This Subdivision sets out the rules about choosing a method of calculating car expense deductions.

On the next page is a graphic that gives information about the 4 methods of calculating *car expense deductions.

The 4 methods give you the choice of which method best suits your situation and needs.

For instance, some methods will involve more paperwork than others, but could give you bigger deductions. There are also eligibility requirements for some methods, so you need to check that you are eligible to use a particular method.

(1) You can choose only one method for all the *car expenses for the *car for the income year. Choosing one method precludes any other method.

(2) However, you can change your choice for the income year.

(3) You can also choose different methods for the same *car for different income years and different methods for different cars for the same year.

(1) To calculate your deduction using the "cents per kilometre" method, you multiply:

by:

The number of cents can be found in the regulations.

(2) But you can use this formula for the first 5,000 *business kilometres only. If the *car travelled more than 5,000 business kilometres, you must discard the kilometres in excess of 5,000.

(3) Business kilometres are kilometres the *car travelled in the course of producing your assessable income. You calculate the number of business kilometres by making a reasonable estimate.

If you dispose of the *car, or it is lost or destroyed, you will need to refer to the depreciation rules to find out how using this method affects the operation of those rules. See section 59AAA (Disposal, loss or destruction of car for which certain methods have been used to calculate car expense deductions) of the Income Tax Assessment Act 1936.

To use this method, you do not need to substantiate the *car expenses for the *car.

(1) Using the "12% of original value" method, you deduct 12% of the cost of the *car when you acquired it or hired it under a hire purchase agreement, or 12% of its market value when you first began to lease it.

(2) But the most you can deduct using this method is 12% of the motor vehicle depreciation limit for the income year when you first used the *car for any purpose (if you own it or are hiring it) or when you first began to lease it.

(3) Your deduction is reduced if you did not own, lease or hire the *car for the whole income year. You can only deduct the amount worked out using the formula:

The full year car deduction is the amount you could deduct if you had owned, leased or hired the *car for the whole income year.

A car-less day is a day when you did not own, lease or hire the *car.

(1) You can use this method only if the number of *business kilometres travelled by the *car in the income year was more than 5,000, or would have been if you had used the car throughout the income year.

(2) Business kilometres are kilometres the *car travelled in the course of producing your assessable income. You calculate the number of business kilometres by making a reasonable estimate.

If you dispose of the *car, or it is lost or destroyed, you will need to refer to the depreciation rules to find out how using this method affects the operation of those rules. See section 59AAA (Disposal, loss or destruction of car for which certain methods have been used to calculate car expense deductions) of the Income Tax Assessment Act 1936.

To use this method, you do not need to substantiate the *car expenses for the *car.

(1) Using the "one-third of actual expenses" method, you deduct one-third of each *car expense.

(2) The expense must qualify as a deduction under some provision of this Act outside this Division (or would qualify if, throughout the income year, you had used the *car only in producing your assessable income). If only part of the expense would qualify, you deduct one-third of that part.

(1) You can use this method only if the number of *business kilometres travelled by the *car in the income year was more than 5,000, or would have been if you had used the car throughout the income year.

(2) Business kilometres are kilometres the *car travelled in the course of producing your assessable income. You calculate the number of business kilometres by making a reasonable estimate.

To use this method, you must substantiate the expenses under Subdivision 900-C.

(1) To use the "log book" method, you multiply the amount of each *car expense by the *business use percentage.

(2) The expense must qualify as a deduction under some provision of this Act outside this Division (or would qualify if, while you *held the *car, you had used it only in producing your assessable income). If only part of the expense would qualify, you multiply that part by the *business use percentage.

(3) The business use percentage is calculated by dividing:

by

and expressing the result as a percentage.

(4) Business kilometres are kilometres the *car travelled in the course of producing your assessable income.

(5) You calculate the number of business kilometres by making a reasonable estimate. The estimate must take into account all relevant matters, including:

(6) You hold a *car while you own it, or it is leased to you, or you are hiring it under a hire purchase agreement, for use in the course of producing your assessable income, even if it is also used for some other purpose.

You can use this method only if you *held the *car for some or all of the income year.

(1) To use this method, you must substantiate the *car expenses under Subdivision 900-C.

(2) You must also keep a log book. Subdivision 28-G explains:

The log book is relevant to estimating the number of business kilometres the *car travelled in the period when you *held it during the income year.

(3) You must keep odometer records for the period when you *held the *car during the income year. Subdivision 28-H tells you about odometer records, which document the total number of kilometres the car travelled in that period.

(4) You must record the following information, in writing, before you lodge your *income tax return:

However, the Commissioner may allow you to record the information later.

(5) You must retain the log book and the odometer records. Subdivision 28-I has the rules about this.

This Subdivision tells you how to keep a log book. A log book is relevant to estimating the number of business kilometres the car travelled in the period when you held it during the income year.

There are 3 steps you need to follow in keeping a log book:

(1) You need to keep a log book for the first income year for which you use this method for the *car.

(2) Having kept a log book for one income year, you don’t need to keep a new one for the next 4 or more income years unless subsection (3) or (4) requires it. If you haven’t kept a new log book for 4 income years in a row, you must keep one for the next income year.

(3) You must keep a log book for an income year if the Commissioner sends you a notice before the year directing you to keep a log book for the *car for that year.

(4) You must keep a log book for an income year if, during that year, you get one or more additional *cars for which you want to use the "log book" method for that year.

(5) When you replace one *car with another, you might have a period when you *hold both the new car and the old car, or a period when you no longer *hold the old car but do not yet hold the new car. In both these cases, you are treated for the purposes of subsection (4) as if you held the one car continuously.

(6) You may choose to keep a log book for an income year even if you don’t need to; for example, because you want to establish a higher *business use percentage.

(1) The log book must cover a continuous period of at least 12 weeks throughout which you *held the *car. If you hold the car for less than 12 weeks, the period must be the entire period for which you held the car.

(2) The period may overlap the start or end of the income year, so long as it includes part of the year.

(3) If you want to use the "log book" method for 2 or more *cars for the same income year, the log books for those cars must cover periods that are concurrent.

(1) It is in your interests to record in the log book any journey made in the *car during the log book period in the course of producing your assessable income. If a journey is not recorded, the log book will indicate a lower *business use percentage than is actually the case.

(2) A journey is recorded by making in the log book an entry specifying:

The record must be made at the end of the journey or as soon as possible afterwards.

(3) If 2 or more journeys in a row are made in the *car on the same day in the course of producing your assessable income, they can be recorded as a single journey.

(4) The following must be entered in the log book:

Each of the entries must be made at or as soon as possible after the start or end of the period, as appropriate.

(5) Each entry in the log book must be in English.

(1) For the purposes of using the "log book" method, you may nominate one *car as having replaced another car with effect from a day specified in the nomination.

(2) After the nomination takes effect, the replacement *car is treated as the original car, and the original car is treated as a different car. This means that you do not need to repeat for the replacement car the steps you have already taken for the original car under this Subdivision.

(3) You must record the nomination in writing before you lodge your *income tax return for the income year in which the nomination takes effect. However, the Commissioner may allow you to do it later.

(4) You must retain the nomination document until the end of the period for which you must retain the last log book that you began to keep for the original *car before the day of effect of the nomination.

(5) Section 28-150 (which is about retaining log books) applies to the nomination document in the same way as it applies to that last log book.

This Subdivision tells you how to keep odometer records for a car during a particular period. Odometer records document the total number of kilometres the car travelled during a particular period.

(1) Odometer records for a period are kept in the form of a document in which the following are entered:

(2) Each entry under subsection (1) must be in English and must be made at or as soon as possible after the start or end of the period, or the end of the specified day, as appropriate.

(3) The following must also be entered in the document:

(4) Each entry under subsection (3) must be made in English and must be made before you lodge your *income tax return.

(5) The Commissioner may allow you to make an entry under this section after you lodge your *income tax return.

(1) You must retain the log book:

The period for which you must retain the log book is called the retention period.

(2) The 5 years start on the due day for lodging your *income tax return for that latest income year. If you lodge your return later, the 5 years start on the day you lodge it.

(3) However, the *retention period is extended if, when the 5 years end, you are involved in a dispute with the Commissioner that relates to a deduction worked out using a *business use percentage that you are relying on the log book to support. See section 900-170.

(4) If you do not retain the log book for the *retention period, you cannot deduct any amount worked out using a *business use percentage that you are relying on the log book to support. If you have already deducted such an amount, your assessment may be amended to disallow the deduction.

(5) For the purposes of the rules about retaining and producing records of expenses (see Subdivision 900-G), the log book is treated as a record of the *car expenses for each year for which you use a *business use percentage that you are relying on the log book to support.

(6) If you lose the log book, there are rules that might help you in section 900-205. For the purposes of the rules about relief from the effects of failing to substantiate (see Subdivision 900-H), not doing something required by this Division is treated in the same way as not doing something necessary to follow the rules in Division 900.

(1) You must retain your odometer records relating to the period when you *held the *car in the income year.

(2) If you keep a log book for the income year, you must retain the odometer records for the same period as the log book, and section 28-150 applies to them in the same way as it applies to the log book.

(3) If you don’t keep a log book for the income year, you must retain the odometer records for the same period as written evidence of a *car expense for the *car for the income year, and section 900-75 applies to them in the same way as it applies to written evidence of an expense.

This Subdivision sets out the situations where you cannot use, or don’t need to use, any of the 4 methods. These situations involve either the nature of your car or the way you use it.

(1) For particular types of *cars taken on hire you cannot use one of the 4 methods to calculate your deductions for *car expenses.

(2) Instead, you must calculate the deductions under the normal principles governing deductions, including the rules for apportioning a loss or outgoing that is only partly attributable to producing assessable income.

(3) This section applies to a taxi taken on hire.

(4) It also applies to a *motor vehicle taken on hire under an agreement of a kind ordinarily entered into by people who take motor vehicles on hire intermittently, as the occasion requires, on an hourly, daily, weekly or short term basis, except if the motor vehicle:

(1) For particular types of *cars used in particular ways you don’t need to use one of the 4 methods to calculate your deductions for *car expenses.

(2) You may use one of the 4 methods, or you may instead calculate the deductions under the normal principles governing deductions, including the rules for apportioning a loss or outgoing that is only partly attributable to producing assessable income.

(3) This section applies if, whenever you used the *car in the income year:

(1) This section lists some miscellaneous cases where you don’t need to use one of the 4 methods to calculate your deductions for *car expenses.

(2) You may use one of the 4 methods, or you may instead calculate the deductions under the normal principles governing deductions, including the rules for apportioning a loss or outgoing that is only partly attributable to producing assessable income.

(3) The cases are as follows:

In applying paragraph (a), the car is taken to be registered in a particular place while it is lawful to drive the car on a public road there.

(1) Subdivision 900-I (Award transport payments) allows certain losses or outgoings to be deducted without getting written evidence. The losses or outgoings are *transport expenses related to an allowance or reimbursement paid or payable to you by your employer under an *industrial instrument that was in force on 29 October 1986.

(2) If that Subdivision lets you deduct *car expenses, or parts of *car expenses, without getting written evidence, you don’t need to use any of the 4 methods to calculate your deductions for those expenses or parts of expenses.

(3) However, your use of the 4 methods for other *car expenses you incur for the *car for the income year is affected, unless you elect not to rely on Subdivision 900-I. Section 900-250 deals with this matter.

(1) If an individual is not an employee, but is a *PAYE earner, this Subdivision applies to him or her as if:

(2) If an entity is not an employer, but pays (or is liable to pay) *PAYE earnings, this Subdivision applies to the entity as if: