Private ruling: Work related motor vehicle expenses
Date of advice: 18 October 2018
Published: December 2018
Ruling period: Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Can you use a logbook to determine your work related motor vehicle use? | A1: Yes | Q2: Can you claim the $20,000 instant asset write-off for the motor vehicle you purchased for your business? | A2: No

Relevant facts and circumstances: On X June 20XX you registered for an ABN. You purchased a vehicle on X June 20XX to be used in your business. On X July 20XX you had the car registration activated online as a requirement for the vehicle to be used in your business. On X July 20XX you had a car check done and as a result you were able to start using the vehicle in your business on this day. You kept a logbook from X June 20XX and continued recording your trips for the required 12 week period.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 28-90, | Income Tax Assessment Act 1997 Subsection 28-90(4), | Income Tax Assessment Act 1997 Section 28-95 , | Income Tax Assessment Act 1997 Section 28-120, | Income Tax Assessment Act 1997 Subsection 28-125(2), | Income Tax Assessment Act 1997 Subdivision 328-D and | Income Tax Assessment Act 1997 Section 328-180 .

Reasons for decision: Summary: Division 28 of the Income Tax Assessment Act 1997 (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 subsection 28-90(4) of the ITAA 1997, business kilometres are kilometres the car travelled in the course of: (a) producing your assessable income; or (b) your travel between workplaces. The business kilometres are to be recorded in a log book, the requirements of which are detailed in section 28-120 of the ITAA 1997, which provides that the log book must cover a continuous period of at least 12 weeks throughout which you held the car. If you hold the car for less than 12 weeks, the period must be the entire period for which you held the car. The period may overlap the start or end of the income year, so long as it includes part of the year. If you want to use the log book method for two or more cars for the same income year, the log books for those cars must cover periods that are concurrent. It is in your interests to record in the log book any journey made in the car during the log book period in the course of producing your assessable income. If a journey is not recorded, the log book will indicate a lower business use percentage than is actually the case. Subsection 28-125(2) of the ITAA 1997 specifies that a journey is recorded by making in the log book an entry specifying: (a) the day the journey began and the day it ended; (b) the car's odometer readings at the start and end of the journey; (c) how many kilometres the car travelled on the journey; (d) why the journey was made. A small business entity that has elected to use the capital allowance rules in Subdivision 328-D of the ITAA 1997 for an income year may immediately write off the taxable use portion of the cost of an asset acquired for less than the threshold amount. The deduction for the assets is claimed in the income year in which the asset was first or installed ready for use. At the time of the purchase of the motor vehicle, the threshold was $20,000 for assets first acquired between 12 May 2015 and 30 June 2018. The conditions for the application of the immediate write off for assets costing less than $20,000 are set out in subsection 328-180(1) of the ITAA 1997, namely: a) The taxpayer was a small business entity for the year in which the deduction is claimed and the year in which the taxpayer started to hold the asset; b) The taxpayer chooses to use the simplified depreciation system for small business entities; c) The asset is a depreciating asset whose cost at the end of the income year in which was used or was installed ready for use for a taxable purpose is less than $20,000. You have advised that you did not start commence your business until X July 20XX, therefore you were not a small business entity for the year in which a deduction would be claimed and the year in which you started to hold the asset. Therefore you are not entitled to an immediate deduction for the cost of the vehicle.