Doctors: Are you maximising your tax deduction for car expenses?
One of the most common questions we get asked by doctors is “How much can I claim for my car expenses?”
Our answer is always the same: “It depends”.
Doctors car expenses depend on a number of factors. It will help you maximise your claim if you understand these factors and learn a little more about the system – and what you can be doing to ensure you are not missing out on anything that you’re entitled to.
5 considerations before trying to work out doctor’s car expenses: Following are five basic considerations to start with. Ask yourself:
- Are you operating a business or are you an employee on salary and wages?
- What structure are you operating your business through?
- Whose name is the vehicle registered in?
- Who drives the motor vehicle?
- Have you kept a log book?
Of these five factors, let’s focus a little on the fifth. Maintaining a log book can often be beneficial if your business/work use is high…
What business kilometres should you record in your log book?
It’s important to record the following travel in your log book to maximise your claim:
- Between places of work such as the hospital and your rooms
- To and from training courses
- To and from conferences
- To and from professional education
- To and from home visits
- To and from nursing homes visits
- To an alternative workplace
- To pick up goods, supplies or equipment for work
NOTE: Travel between home and work is considered private travel and is not tax deductible. However, travel between home and work can be claimed in limited circumstances such as where:
- You are required to carry bulky equipment AND no secure storage place is provided at your work place.
- You are on-call and you are deemed to have commenced work before you leave home. This includes doctors and medical specialists providing medical guidance while in transit.
An example of the latter is where a surgeon responding to an emergency provides advice from his home and then travels to the hospital. The surgeon commenced employment duties at home and is therefore entitled to claim the travel from home to work.
Expense calculation methods for sole traders & salary earners
There are currently two methods for calculating the mileage component of car expenses – both for sole traders and for salary and wage earners:
- Cents per kilometre method – no log book is required and you can currently claim up to 5,000km per motor vehicle. The kilometres claimed need to be a reasonable estimate and the ATO can ask you how you calculated your claim.
- Log book method – a log book is required to be kept for 12 consecutive weeks and needs to represent your travel throughout the year. Each logbook is valid for five years. As mentioned, this is usually beneficial if your business/work use is high.
Doctors car expenses for companies or trusts
When your motor vehicle is owned by your company or trust, and you are an employee of that company or trust, then the motor vehicle is considered a fringe benefit provided by the entity to you as the employee.
This means that the entity claims 100 percent of the motor vehicle expenses for tax purposes.
The company or trust then deals with the benefit provided to you, the employee, using the Fringe Benefits Tax legislation.
Keeping a log book may reduce the fringe benefits tax liability if the business use is high.
Any further questions about the rules and regulations concerning doctor’s car expenses? Contact us and we’d be happy to help: 02 4322 9044.