From 1 July 2020, the cents per kilometre deduction rate for car expenses will rise to 72 cents per kilometre (previously 68 cents). The new rate will apply until such time that the commissioner determines that a change to the rate is necessary and continues to apply to the 2022 tax year.
The cents per kilometre method can be used by sole traders or individuals in a partnership to claim a deduction in respect of car expenses incurred in the carrying on of business.
The deduction amount is calculated by multiplying the number of business kilometres travelled by the cents per kilometre rate. Individuals can claim a maximum of 5,000 business kilometres per car, per year using the cents per kilometre method.
It is important to note that while written evidence is not required to show the number of business kilometres travelled, the ATO may request some evidence to show how the amount was calculated, therefore it is recommended that diary records be kept.
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