Individuals who claim the maximum allowable deduction on the cents per kilometre method are more likely to get an ATO review, a recent media release has warned.

The media release has cited that the ATO believes many taxpayers think they are entitled to a “standard claim” for motor vehicles. Clients need to be aware of the specific substantiation rules for individuals, and in particular for motor vehicle expenses.

From the 2015/16 year, there are two methods for claiming car expense deductions that can satisfy the substantiation rules. They are the logbook method and the cents per kilometre method. Where the substantiation rules are not met, no deduction is allowable for the expenses. Log Book Method – If a taxpayer wishes to claim car expenses by reference to actual expenses apportioned between income-producing use and private use of a car, the expenses must be substantiated under the logbook method.

Under this method, Log Books are required to be kept for a 12 week minimum. Odometer readings are required. Written evidence of expenses ( receipts ect. Fuel and oil expenses may be substantiated by odometer records. If a taxpayer wishes to use cents per kilometer method – (if business use is 5,000 km or less, or a claim is limited to 5,000 km) – substantiation records are not relevant. the number of business kilometres can be based on a reasonable estimate.