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Travel claims clarification

Discussion in 'Accounting & Tax' started by dabbler, 4th Oct, 2016.

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  1. dabbler

    dabbler Well-Known Member

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    Hi All, does anyone know the answer to below ? we have had some prior discussions on this.

    If claiming travel c/klm , can't seem to find if it is

    5000klm / vehicle
    5000klm / person

    And further to that, does it need to be broken down between spouses and name/s on title



    PS is travel to clean, repair, discuss with agents etc allowed in the period from first availability to gaining a tenant.
     
  2. bumskins

    bumskins Well-Known Member

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    Technically your only supposed to claim 5000KM method if you are the owner of the vechicle. (why this is significant is because its suppose to account for multiple costs, depreciation, fuel, maintenance, etc, which don't all relate to a non-owner).

    In any event I have always taken it to be 5000KM Per Person/Per Vehicle. So you could presumably claim over 5000km if you used 2 different vehicles. Obviously anything out of the norm you would want to be able to truly substantiate.
     
  3. Sakura

    Sakura Member

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    If it's your car, but have it under another person's name, are you still able to claim the travel expenses?
     
  4. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    How can it be your car if someone else owns it?
     
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  5. Sakura

    Sakura Member

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    Sorry, what if it was your parents car.
     
  6. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    A taxpayer is generally limited to 5,000 km per year per vehicle provided it is a car. A borrowed car is ineligible...Thats like claiming cents per Km for a rented car. A taxpayer can use more than one vehicle and this is totally acceptable. However in the world of IPs such claims should be supported by more than just a few scant receipts and diary records.

    The car use may be capital in nature and non-deductible. eg initial repairs and agent engagement, building a deck etc. The ATO will (on review) seek reasonable evidence that the total KM's were undertaken and the reasons and if there was any other purposes for the travel. (eg XMas with parents). It is very unorthodox to claim such high KMs as a passive investor. Its a sign of a dump requiring work and thats going to fall into the non-deductible basket.

    Overclaiming this issue could result in penalties and interest too.

    Like all property costs the deduction in shared based on title.
     
  7. MikeLivingTheDream

    MikeLivingTheDream BCOM MCOM MTAX CPA CTA Registered Tax Agent

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    under the cents per kilometre method

    1. it is 5,000 business kilometres per car NOT per individual
    2. sometimes individuals will want to make a claim where the car is not registered in their name. usually where the vehicle is registered in the name of their partner or parent.

    Refer to Scott v FCT (2002) where courts held that effectively having the power to dispose of the vehicle (i.e. they have the right to sell the car without interference from someone else) will determine whether you can make a claim for that particular vehicle.
     
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  8. dabbler

    dabbler Well-Known Member

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    My understanding was it was per car, but then I was thinking about the property ownership too between spouses. Our cars are part in one, part in other name for rego, but we own them together

    When you have IPs in capitals and Regionals, it does not take long to clock up the Ks if you do most of the work and inspect etc, I put 40k ks on one car alone in a very short time.

    I bought a couple of them specifically for travel, but we have actually used them all.

    At the same time, I am not wanting to raise eyebrows, but, for example, if you drive to Bris and back twice your at 4k+ ks.

    I do have photos where some may include a vehicle, in hindsight, should do this by habit, I do keep fuel reciepts, they show the trips.
     
  9. dabbler

    dabbler Well-Known Member

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    Car rego is not like land title as vehicles can be bought and sold without registration, but without reading the case, it seems that is what they will look at, or is being able to prove your half owner interference ?

    I did not think of having both names on rego, not sure if individuals can do this as rego is more about nominating the main operator so they can have a default person to fine and ensure insurance is up to date etc.
     
  10. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    I would argue and have yet to see a issue with ATO that; provided that a spouse owns a car the other can claim a deduction if they use it for an IP but not for a business use. Its not greatly different to the irrelevance of who pays the loan or specific property outgoings. Of course trying to double dip by taking advantage of such a view may lead to a enhanced level of review too.

    I cant recall a client with such large Kms for a IP but would ask a number of Q's if they did. Just as ATO would
     
  11. dabbler

    dabbler Well-Known Member

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    We are not doing things the way many do.

    I never bothered previously, but recently, when it was practical, we have tended to everything, of course we do not do 2000k or 1600k round trips to fix minor things, but if my earning capacity was say 2k vs saving 5, 10 or more, then we travel. Never bother with anything local.

    Does not take long to add up if you do 10 2000k trips for major preparation, manage trades, perform physical work, meet and discuss with agent & in some cases hold opens when the PM won't, multiply that by non local IPs, grows quick. I do not expect this level to be continued forever, but it will probably be easy to do 5k ks for 2 cars.

    I will think about it all and discuss once I put all the data in front of accountant. They may just say claim everything, so I appreciate the discussion so am more informed.

    PS would people suggest the below & maybe other steps ?

    Log goes without saying
    Keep fuel payments to show the trips
    Take a photo of vehicle used at each trip/property
    other?
     
  12. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    A log book not applicable to <5,000km of travel but may support the period of use, distance etc. It doesnt explain what you did. For substantiation using cents per KM a logbook isnt likely a requirement. Fuel receipts just show location. Perhaps irrelevant but may demonstrate presence, not purpose.Photo just shows presence not purpose.

    I would argue the ATO could see the large kms and see a disproportion between what is typical and seek to vindicate. Thats the word I use when some junior ATO person who gets paid to deny claims does when they see a variance from the norm. They dont have to prove you wrong just find a reasonably arguable position there is a concern. They are like a dog with a bone and will speak to the agent, tenant etc and even fly in to do it and seek to disprove just one minor thing you tell them. eg You replaced a vanity and redid some tiling = capital expense. Then they deny the lot and impose penalties. In some of these cases the penalties can be high if you misrepresent facts to ATO.

    A recent case showed this and the ATO found a minor case of the agent "splitting" a asset replacement into two charges with false descriptions (HWS repair) so it fell under deduction limits. The agent admitted the landlord put pressure on him to do that. They dont care if it takes a week of work.

    Tip : never consider you have nothing to hide. The ATO know the rules better than most taxpayers and will throw you under a bus if they take a dislike.

    I would keep a diligent record of what you did on each trip down to the hour. Supported by cost records and details of discussions etc.
     
  13. dabbler

    dabbler Well-Known Member

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    Thanks Paul, I hear you.

    In regards to vehicle travel, it may seem outside the norm to have more than one car each and lot of klm's, I did purchase 2 specifically for property matters though that can tow. We use the cheapest one usually & none are fancy sports cars or toys, anyways...

    What is/would be the average travel at a guess that people with non local IPs claim ?

    What are other forum members claiming, for vehicle, and for that matter, other travel ?
     
  14. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    Each taxpayer claim is relevant to themselves and based on fact. Substantiation rules do not allow for a standard amount. ie Many have none. Some have a little. Fewer claim a lot esp when its self managed or let by the room.

    More than once a year interstate can raise eyebrows. Esp if you later buy another. Blind Freddy may argue the trip was to buy and its non-deductible.
     
  15. Rob G

    Rob G Well-Known Member

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    "Car expense" for Div 28 purposes relates to a car "owned or leased" by the taxpayer, s.28-12.

    "Owned" is not defined and so will take its ordinary meaning.

    My reading of s.28-20 ...

    You can only choose one method in respect of a particular car in any year, s.28-20(1).

    You can use different methods for different cars in the same year, s.28-20(3).
     
  16. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    There is way (some) taxpayers can double dip some MV expenses where a employer reimburses them. s51AH ITAA36 denies deductions where a employer has reimbursed. Makes sense. But if the taxpayer is reimbursed by the employer based on a logbook but claims a deduction at D1 using the cents per KM that is a deemed deduction and not a loss or outgoing and so they can get reimbursed and still claim the deduction using the other method.

    Other examples : If a car is owned jointly and both parties are travelling in the car together you cannot double count the travel but on the other hand each owner of the car is entitled to claim up to 5,000 kilometres individually when they use the car for tax deductible purposes. For example, a husband and wife may own 2 cars and both cars are in joint names. The husband could use car one for 6 months and clock up 5,000 kilometres then swap with his wife and use car two for 6 months to clock up another 5,000 kilometres. The wife could do the same with the cars reversed. As a result, they would both be entitled to claim 10,000 kilometres, 5,000 kilometres for each car they own. Also, if you change cars during the year, for example sell your old car and buy a new one, you can claim up to 5,000 kilometres for each car.
     
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  17. Rob G

    Rob G Well-Known Member

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    Reimbursement using a cents/km basis is not a genuine reimbursement because it is not an expense that has been vouched for. The flat rate is merely an estimate and would be an allowance under the ordinary meaning.

    Regardless, 'reimbursement' using the cents/km basis no not a fringe benefit, s.22 FBTAA.

    The amount is assessable income to the employee, s.15-70 ITAA97

    It is up to the employee to choose one method under Div 28 for claiming deductions
     
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