Private ruling: Motor vehicle expenses
Published: January 2012
Ruling period: Year ended 30 June 2013 | Year ended 30 June 2012 | Year ended 30 June 2011 | Year ended 30 June 2010
Date scheme commenced: 13 January 2010

Ruling: Q1: Are you entitled to claim a deduction for work related motor vehicle expenses you incurred? | A1: 

Relevant facts and circumstances: In December 20XX, you entered into a loan agreement with a finance company to purchase a car. The loan agreement is from 4 December 20XX to 4 December 2012 with 36 monthly repayments of $X. You entered into a salary sacrifice arrangement with your employer on 13 January 2010 to make payments in respect of the car loan of $X per week. You use the car for both private and work related purposes. You incurred motor vehicle running costs, in relation this car, of: · approximately $X in the 20XX-10 financial year, of which 66.05% was work related. · approximately $X in the 2010-11 financial year, of which 49.55% was work related. You pay for fuel, registration, insurance, repairs and maintenance expenses from your after tax salary. You record all work related trips and will be able to supply the work related usage applicable for the 2011-12 and 2012-13 financial years

Relevant legislative provisions: Income Tax Assessment Act 1936 Section 51AF

Reasons for decision: Detailed Reasoning - Detailed reasoning: Section 51AF of the Income Tax Assessment Act 1936 (ITAA 1936) operates to deny a deduction for car expenses incurred by an employee in relation to a car which is provided by the employer for the exclusive use of the employee and which the employee is entitled to use for private purposes. Fuel, registration, insurance, repairs and maintenance are considered car expenses. In AAT Case 7273 (1991) 22 ATR 3402; Case Y43 91 ATC 412, the Tribunal stated: the disallowance of car expenses is primarily put in place to prevent "double dipping", in which an employee claims expenses already factored into the formulas used to calculate fringe benefits tax assessed to the employer. In your case, you have entered into a salary sacrifice arrangement with your employer whereby your employer pays the loan repayments for your car. In doing so, we consider that your employer is providing you, the employee, with a car for your use and you are entitled to use the car for private purposes. Accordingly section 51AF of the ITAA 1936 specifically denies you from claiming a deduction in relation to car expenses.

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