Private ruling: Work-related motor vehicle expenses
Date of advice: 2 October 2024
Published: 11 November 2024
Ruling period: 1 July 20XX to 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Are you entitled to claim a deduction for work related motor vehicle expenses? | A1: No.

Relevant facts and circumstances: You commenced a fleet vehicle leaseback agreement with your employer. The lease agreement is for a vehicle. The weekly leaseback fee is for your private use of the vehicle. The weekly leaseback fee is deducted from your salary. Under the agreement, your employer is responsible for a fully maintained light fleet motor vehicle, including comprehensive insurance, fuel, maintenance, 24/7 roadside assistance and incident/accident management. The agreement expiry date is the 28th of April 20XX.

Relevant legislative provisions: Income Tax Assessment Act 1936 section 51AF | Income Tax Assessment Act 1997 section 8.1

Reasons for decision: Summary: To claim a deduction for work-related vehicle expenses, you must own or lease the vehicle and the expense must be directly related to earning your income. Based on the terms of the vehicle leaseback agreement you have with your employer; you do not own or lease the vehicle for taxation purposes or incur any of the vehicle's work-related expenses. Any expenses you incur are considered private in nature and you are not entitled to claim a deduction. | Detailed Reasoning - Detailed reasoning: Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature. Division 28 of the ITAA 1997 specifically deals with the deductibility of car expenses. Section 28-12 of the ITAA 1997 allows a deduction for car expenses to the taxpayer who owns or leases a car. In instances where an employee is actually incurring expenses in relation to a vehicle provided by an employer, for whatever reason, section 51AF of the Income Tax Assessment Act 1936 (ITAA 1936) specifically denies employees from claiming deductions in respect of the car expenses. The employee is prevented from claiming a deduction for expenses they have incurred because they are used to reduce the employer's fringe benefits tax liability. The expenses are factored into the formulas used to calculate fringe benefits tax assessed to the employer and if the employee was also entitled to claim a deduction for the expenses then there would be double dipping. | Detailed Reasoning - Application to your circumstances: You entered into a Light Fleet Vehicle leaseback agreement with your employer. Your employer offers either as a condition of employment, a discretionary benefit and/or for work use, a fully maintained light fleet motor vehicle, including comprehensive insurance, fuel, maintenance, 24/7 roadside assistance and incident/accident management. As part of the agreement, private use is permissible subject of payment of the leaseback fee and adherence to the Light Fleet Motor Vehicle Policy and Procedure. You opted for this condition and pay a weekly fee. Therefore, based on the leaseback agreement, you do not own or lease the vehicle for taxation purposes, or incur any of the vehicle's work-related expenses. Any expenses you incur are for your personal use of the vehicle and are not directly related to earning assessable income. Accordingly, these expenses are considered to be private in nature and you are not entitled to a deduction for motor vehicle expenses under section 8-1 of the ITAA 1997.