A car which you use for business doesn’t have to be owned by the business. In fact, it doesn’t have to be owned by you (although, you can’t claim as many expenses if it isn’t).
If you use your personal, private car for work, though, there are important things you must do.
Insurance cover
Most insurance companies separate personal cover from business cover – it’s a different type of policy. If you only have a personal car insurance policy, it’s likely that you won’t be covered for some (if not all) business use. Many people do use their private car for business use without appropriate cover and risk catastrophic loss.
If you use your vehicle for work, notify your insurance company. If you are simply commuting between your home and an office, the insurance company may determine that there’s no additional risk and will write this into your policy (after all, most other people who work also commute from their home to an office). Your insurance cost can be reduced by having a good quality, approved security alarm and immobiliser, GPS tracking and a steering lock. Park the vehicle in a secure location overnight.
The change in use really kicks in if it increases your risk.
Risk and liability
An increase in risk is associated with:
- Higher mileage (statistically more likely to have an incident)
- Driving during work hours (increased exposure to heavier traffic, distractions, etc)
- Carrying goods and samples (increased risk of break-in, damage)
- Visiting a larger number of unknown sites (increased risk of damage, increased driving on unfamiliar roads)
- If your car is signwritten but only has a private insurance policy, this could be an issue for you in the event of a crash.
Can vehicle expenses be claimed?
You can calculate what portion of expenses you are allowed to deduct either by keeping a logbook or claiming expenses per kilometre.
You can only keep a logbook for a car you own. If you keep a logbook you must keep it for at least 12 continuous weeks, recording all business and personal travel. Keep all receipts for expenses related to your car (fuel, registration, running costs, insurance, etc). Calculate the business percentage (the percentage of business driving vs personal driving). The logbook is valid for five years.
Alternatively, you can claim up to 5000km/yr at 66c per kilometre. No logbook is required but you may be asked to explain how the use of your car was work-related.
In either option, you can’t claim kilometres driven from your home to your usual place of work and back again.
If you are asked by your employer to use your private car for work (i.e. it’s part of the grey fleet), they should be providing financial compensation to you either for direct costs or on a per kilometre rate.
It’s best if you contact the Australian Taxation Office for additional advice.
Darren is an expert on driving and transport, and is a member of the Institute of Advanced Motorists
