Private ruling: Work related car expenses
Published: February 2012
Ruling period: Year ended 30 June 2009 | Year ended 30 June 2010
Date scheme commenced: 1 July 2008

Ruling: Q1: Are you entitled to a deduction for two thirds of lease expenses incurred in receiving rehabilitation care? | A1: 

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. You were receiving payments from TAC as a result of a major accident that involved surgery and rehabilitation. You were out of work for a year and a half. You did not use your ute for work purposes. You were working for yourself and you signed a contract for a company to lease a new ute to carry the company tools to different sites. You stopped using the ute for work purposes after the accident. You negotiated with TAC to accept that the lease of the vehicle was part of your job requirements. After some negotiations, TAC accepted your reasons and increased your payments to include the extra expenses of your lease. The cost of the lease was $1,000 a month during your recovery time. You used the ute for private and rehabilitation.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 8-1 | Income Tax Assessment Act 1997 Division 28 | Income Tax Assessment Act 1997 Section 28-90

Reasons for decision: Summary: 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, or relate to the earning of exempt income. Division 28 of the ITAA 1997 specifically deals with the deductibility of car expenses. Section 28-90 of the ITAA 1997 allows a deduction for actual car expenses using the "log book" method, for business kilometres. Under section 28-90(4) of the ITAA 1997, business kilometres are kilometres the car travelled in the course of: · producing your assessable income; or · your travel between workplaces. The business kilometres are to be recorded in a log book, the requirements of which are detailed in Subdivision 28G of the ITAA 1997. A deduction is generally not allowable for the cost of travel between your home and your rehabilitation care as it is considered to be a private expense. In your case, you wish to deduct an amount equal to 2/3 of the lease expenses, which you consider to be fair. As this method does not distinguish between work related or private travel, you are not entitled to a deduction for this expense. Additionally, as the travel is private, no deduction is allowed.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.