With petrol prices rocketing towards $2 a litre, everyone’s looking for ways to cut back on costs. But there’s one thing you may not have considered: claiming your fuel on tax.

Michael Croker, a tax expert at Chartered Accountants ANZ, says this is something everyone should consider this financial year.

“You might have been entitled to deductions in the past, but thought the cost was too small to claim,” he says.

“But now with fuel costs [being what they are]… it’s really hitting the hip pocket.”

If you use your car for work, there’s a good chance you’re entitled to a decent chunk of change back at tax time. But how do you know how much to claim? Or if you’re even eligible?

Follow the three golden rules

“Fuel falls under work-related deductions on your tax return,” says Elinor Kasapidis, senior manager of tax policy at CPA Australia.

But she says, like all work-related deductions, there are a few “golden rules” to follow when figuring out what you can claim:

  1. 1.You must have spent the money yourself (ie. you weren’t reimbursed from your work).
  2. 2.The fuel must directly relate to you earning your income.
  3. 3.And you have to keep records to prove the expense.

Some good news: that second point is quite broad.

It’s not just for people who drive for a living, like couriers and rideshare drivers. You can claim the fuel used from any work-related trip — whether you’re a real estate agent driving between inspections, or a small business owner taking trips to the bank and post office.

The bad news: no, it doesn’t include your commute!

A woman looking tired and stressed while sitting in traffic.
Your commute from work to your regular place of work is technically classified as “private”.(Adobe Stock)

Wait. Why can’t I claim my commute?

Though driving from home to your work puts you in a position to earn your income, ATO assistant commissioner Tim Loh says the travel is technically classified as “private”.

You can’t claim this expense at tax time “even if you live a long way from your regular place of work or you work outside normal business hours,” he says.

There are however some “limited circumstances” where it may be OK.

That includes:

  • Travelling between one workplace and another (ie. if you have two jobs or are an itinerant worker).
  • Driving from home directly to an alternate workplace.
  • When you have to carry bulky tools or equipment that are essential to your job.
  • How do you work out how much to claim?

    The ATO advises using one of two different methods to figure out how much you can claim.

    Mr Croker says the cents per kilometre method is the more straightforward of the two. This allows you to claim a set rate (currently 72 cents, although that could change) for every kilometre travelled while working.

    But it has some downsides: you can only claim up to 5,000km of travel and this rate is only a portion of the amount you really spent. Plus: when using this method, you also can’t claim any further car-related deductions like registration, repairs and insurance.

    The logbook method, on the other hand, is more comprehensive but a bit more fiddly.

    “You keep track of all the running costs of your car … as well as all the business travel you did and the total amount of kilometres you drove,” Mr Croker says.

    If you work out that 60 per cent of your travel was work-related, for instance, you can then claim 60 per cent of the car’s total running costs.

    Though you have to keep records when using the cents per kilometre method (ie. some kind of diary of work-related trips), the logbook method requires a bit more work. You have to record every trip — including odometer readings — for a minimum of 12 consecutive weeks and keep your receipts as well.

    An example of an accurate logbook entry from the ATO.
    An accurate logbook entry includes odometer readings from the start and finish of each trip.(Supplied: ATO)

    “I know [recording all this] is the last thing on people’s minds when you’re in a rush to get to work,” Ms Kasapidis says.

    “But it’s also really important.

    She recommends using the ATO’s myDeductions app to track all your expenses.

    Mr Croker also suggests taking photos of your receipts, perhaps keeping them in an album on your phone or computer, so they don’t get lost or damaged through the year.

    What if you’ve just realised this is a thing? Is it too late to claim anything?

    Not necessarily!

    “You might be able to re-establish some of your records,” Mr Croker says.

    “It’s always possible to go back through your diary and emails and appointments. You’ve just got to try and figure out how many kilometres you might have travelled [to use the cents-per-km method].”

    Re-establishing a logbook, however, would be trickier.

    Though you might be able to figure out some odometer readings from times you’ve got the car serviced, for instance, you won’t be able to account for all your trips (both personal and professional). And let’s be real: did you really keep those old fuel receipts?

    But, as there are more than 12 weeks left until the end of the financial year, there’s still time to start a logbook! Mr Croker says you just need to ensure these coming weeks are fairly representative of your travel over the course of the year.

    If you’re not sure about your options or what exactly you should be recording, Ms Kasapidis recommends chatting to an accountant.

    “Instead of waiting for tax time, have an early conversation and set yourself up for the year ahead,” she says.

Extracted in full from: Petrol is so expensive right now. Here’s how much fuel you can claim on tax – ABC Everyday