12 Per Cent Of Original Value Method*

This is one of the four substantiation methods for a work-related car expense tax deduction claim.

* this claim method has been discontinued from 1 July 2015

Following changes announced in the 2015 Budget, the 12% and 1/3rd of actual claim methods are no longer available from 1 July 2015. The amending legislation is here.

The following summary reflects the position until 30 June 2015.

This method that involves the least amount of record-keeping effort. However it can only be used when you have a reasonable basis for concluding that at least 5,000 business kilometres has been travelled.

What You Can Claim Using The 12% of Value Method

The allowable claim is generally calculated as 12% of the cost of the car when it was originally acquired by you. This is qualified by the following:

  • If the car is leased, then you use 12% of an arms length market value
  • ‘Cost’ will include dealer charges and stamp duty
  • if you are not registered for GST, then the cost includes GST
  • if you are registered for GST, then the cost is reduced by the amount of the GST credit (the Tax Office assumes a 1/3rd creditable purpose in this case)
  • the maximum that can be claimed is limited to 12% of the luxury car limit
  • if the car was inherited, or received as a gift or prize, then the depreciated value at the time of acquisition is treated as the cost
  • part year ownership, or part year claims, are apportioned by the number of days owned or eligible to claim

In terms of record-keeping, the 12% of value method is pretty light. Obviously you would need to have written evidence supporting the acquisition cost or value of the car; and you are required to have a reasonable basis for concluding that you have travelled more than 5,000 business kilometres.

For other claim methods see Work Related Car Expenses

This page was last modified on 16 Aug 2017