Car Expense Substantiation Exemptions

A primary purpose of the car expense substantiation rules is to simplify, and to an extent reduce some of the record-keeping effort involved in formulating car expense claims.

Without the substantiation rules, car expense claims would have to be formulated under the normal rules for claiming a tax deduction.

However if your car and its use are exempt from the substantiation rules, you can choose whether to use one of the car expense substantiation methods.

If you choose not to, then expenses are calculated and substantiated under normal expense deduction rules, with supporting evidence required.

Note that these rules do not apply if the vehicle is supplied to you by an employer – the Fringe Benefits Tax rules cover that.

Substantiation Rules – Exceptions

Car expense substantiation rules apply in most situations, but there are some important exceptions. Loose descriptions of those exceptions are:

• Cars provided for exclusive use of employees, allowing private use
• Hire cars
• Unregistered cars used for earning income
• Cars which are trading stock of the business
• Certain small commercial vehicles, such as panel van, utility or taxi where private use is minor, irregular and incidental
• Car repair expenses in a car repair business

If your vehicle and usage fits one of the above categories, the application of the substantiation rules may be optional.

Each year, you are legally able to claim by the method which provides the best result.

Further information

• ITAA 1997 Sec 28.170 – Exception for particular cars used in particular ways
• ITAA 1997 Sec 28.175 – Further miscellaneous exceptions
• Work related car expenses

This page was last modified on 10 August 2015