The ATO will now raise the cents per kilometre deduction rate for motor vehicle expenses to 72 cents for the income year starting 1 July 2020.
The rate last changed in 2018 which saw the rate rise to 68 cents.
The cents per kilometre method currently allows taxpayers to claim up to a maximum of 5,000 business kilometres per car per year, without requiring written evidence.
Work-related car expenses have been on the ATO’s radar in recent years, with 3.6 million taxpayers claiming more than $7.2 billion in 2017–18.
According to the ATO, one in five claims is exactly at the 5,000km limit, with the agency’s analytics picking up unusual claims by comparing taxpayer claims with others earning similar amounts in similar jobs.
The impact of COVID-19 and government restrictions will likely be reflected in tax-time claims this year, with work-related car expenses claims expected to see a dip.
“A lot of the deductions that people commonly claim are likely to go down — work-related travel, work-related clothing etc,” said H&R Block director of tax communication Mark Chapman.
“Work-related travel has been pretty much off the agenda since the beginning of March, so if you take out that four-month period, you’re likely to see those claims go down quite substantially.
“But counterbalancing that is that working-from-home claims are likely to go up, so I think people can’t automatically assume that what was on the tax return last year is going to be similar to what is on the tax return this year; there are likely to be significant changes that need to be looked into.”
In response to COVID-19, the ATO has also introduced a shortcut method for taxpayers to calculate home office expenses at a rate of 80 cents per hour for the period between 1 March and 30 June 2020.
The new method is in addition to the existing fixed-rate method and actual cost method, with taxpayers able to choose the appropriate method for their circumstances.
Claims before 1 March 2020 must be under the two standard approaches.
Jotham Lian is the editor of Accountants Daily, the leading source of breaking news, analysis and insight for Australian accounting professionals.
Before joining the team in 2017, Jotham wrote for a range of national mastheads including the Sydney Morning Herald, and Channel NewsAsia.