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Walshs are leading financial advisors in Brisbane, providing accounting and strategic financial planning advice.

T: 61-7-3221 5677
Email: E : enquiries@walshs.com.au

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Level 24/10 Eagle Street, Brisbane QLD 4000

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Tuesday, 21 June 2022 / Published in Walshs Blog

Taxation of Electricity for Electric Vehicles

With fuel prices on the rise, along with a global environmental awareness, the electric vehicle market in Australia has seen an exponential growth. For small business owners where business vehicles are a common asset with sizable deductions, it is important to know the differences between what can be claimed for a motor vehicle (MV) and an electric vehicle (EV). For the most part, EV’s are treated identically to MV’s however, while fuel is easily quantifiable and therefore easily deductible, the same cannot be said for electricity.

The current ATO accepted methods of calculating vehicle deductions are the cents per kilometre method and the logbook method.

 

Logbook Method

The logbook method for motor vehicles allows a deduction for all running costs, including fuel, at a business use percentage, provided a sufficient logbook has been maintained see ATO guidelines for advice. Understandably, for EV owners the ability to claim fuel costs provides little benefit. There is very little ATO guidance on claiming electricity costs for EV’s and as such it is crucial to have a justifiable expense claim. In practice, the extensive process of determining the electricity cost of charging an EV offers little reward. After apportioning your home electricity bill for the EV related use and further apportioning this by the business use percentage, the resulting deduction is minimal.

Benefits of the logbook method:

  • Represents deductions for actual costs incurred for each year
  • Ability to include vehicle depreciation as a deductible expenditure

 

Cents Per Kilometre Method

The cents per kilometre deduction allows a general $0.72 deduction in relation to the business use kilometres (up to 5,000kms) and excludes the potential depreciation on the vehicle. This $0.72 per kilometre deduction is assumed to cover the running costs of a vehicle with minimal record keeping requirements. Although this method does not allow increased deductions for years where the car may undergo extensive services or other expenses, the resulting deduction is often marginally better than the logbook method for EV’s, assuming the car was not recently purchased and a depreciation deduction was not available.

Benefits of the cents per kilometre method:

  • Accepted ATO standard rate allowing for electricity to be recouped along with other running costs
  • Simple calculation requiring little maintenance

How We Can Help

Given the rigid structure of the cents per kilometre method, as well as the 5,000km limit on the claim, it is unwise to solely use this method when calculating electric vehicle expenses. Instead, we can make use of the ability to select either method on a year-by-year basis. At Walshs, we can assess the EV expenses for each year and determine the method providing the greatest benefit to you. We can advise how to optimise your EV claim each year to ensure you are making the most of your vehicle in each financial year.

 

To find out how Walshs can assist you with your electric vehicle claims, please contact our office on (07) 3221 5677 or book an appointment here.

 

Article by: Roarke Ronan, Accountant, Walshs

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Tagged under: accounting, ATO, Brisbane finance, brisbane medical accounting, electric vehicles, EV tax, financial advice, financial planning, Tax, tax advice, Tax planning

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About Walshs

Walshs Practice was established in 1991 and has grown to become one of South East Queensland's leading accounting and financial planning firms. Walshs encompasses tax and accounting services, business structuring, wealth advice, business services, superannuation and retirement planning, finance, insurance, lending and estate planning all under one roof.

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  • OFFICE - Level 24/10 Eagle Street, Brisbane QLD 4000
  • POSTAL ADDRESS - GPO Box 12, Brisbane QLD 4001
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All advice on this site is general in nature and does not take into account your personal circumstances. Please do not hesitate to contact one of our adviser accountants or financial planning advisers if you have a query that is specific to your circumstances.
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