A BILL is before Parliament which has a section dealing with tax deductions based on mileage.
The calculation at present is easy. The rate is 72c a kilometre and the maximum number of kilometres you can claim for is 5000. The self-employed, only, will be will be allowed to continue to use this basis for calculating their business mileage.
The new system proposed will be a two-tiered system. You’ll have to use a logbook and keep it for three months once every three years. Those who have relatively high business mileage should take advantage of this change.
It’s probably easiest to explain the system with an example. X travels 30,000km for both business and personal running in one year. His tier 1 calculation applies to the first 10,000km. Fifty-five percent of his running costs are for business. This means he can base his claim for tier 1 on 5500km. If the rate were 75c a kilometre his claim would be $4125.
He’s still got 20,000km of mileage left. Supposing the tier 2 rate is 25c per kilometre, his claim is based on 11,000km which entitles him to another $2750. That makes a total claim of $6875, which is much better than the maximum available under the old rules of $3600.
The Government plans to bring in these new rules from 1 April 2017. The actual mileage rates are likely to be announced sometime after 31 March 2018.
This new system provides a more accurate way of calculating mileage, but it is going to add to the amount of record-keeping. You're going to need to tell us the total number of kilometres you travel in each year. Therefore, please start now. Make a diary note to record your odometer reading when you finish work on 31 March 2017. Then make another diary note to do the same on 31 March 2018 and so on. If you change vehicles, you’ll need to get your odometer reading before you trade in your old vehicle and then make a note of the reading on the new vehicle. We hope you’ve got a good memory for this.