Any information stated by Car Next Door is general advice and does not take your individual circumstances into account. You will need to fully consider your individual situation and if necessary seek professional advice.
Do I need to declare income from renting out my car?
Generally, the income you earn from renting out your car can be considered to be assessable income. The ATO has also prepared some general advice for people who earn money by providing goods or services in the sharing economy. You should speak with your accountant to get advice relevant to your situation.
If you declare your earnings from renting out your car you can also claim deductions (expenses) related to that income. If your deductions exceed your income, you may need to defer that loss to a later year or you might be able to claim the deduction immediately - it will depend on your personal circumstances.
It is important to seek out the right advice as even minor changes in circumstance may change the way you declare income or expenses.
What expenses may be deductible?
If you determine that your income from Car Next Door is assessable, you may be able to claim all or a portion of the costs that you have incurred in making your car available for rent.
There are some costs you can claim 100% which relate directly to earning the income, such as:
- the CND commission
- the CND monthly membership fee; and
Then there are “car expenses” which you must use one of the authorised methods to claim. You have two choices:
- Cents per kilometre method
This is the easiest method and allows you to claim a set rate of 68c per kilometre in the current tax year (66c in the 2018 year) for the trips that are related to earning you assessable income.
You can simply take the number of kilometres travelled on trips from your monthly or annual statement provided by Car Next Door and multiply this by the relevant rate. If you also use your car for work you can add those kilometres as well.
However, the catch is that you can only claim up to 5,000 km using this method, therefore the maximum you can claim for car expenses using this method is $3,400 in the current tax year ($3,300 for 2018 year). If your total kilometres on CND trips for the year is over 5,000 you can still use this method, but you are limited to the claim for 5,000 kilometres.
You need to keep a record of the odometer at the start and the end of the tax year, and use your CND statements to determine the number of kilometres to claim, but otherwise this is a really simple method to use to claim your tax deductions.
- Log Book method
A more complex method is the log book method. You need to keep a 12 week log book to use this method. However, the information provided on the CND statements will give you lots of information to help you complete the log book.
You can determine the percentage of car expenses you can claim based on the business percentage determined from the log book. The types of costs you can claim include:
- depreciation on the cost of the vehicle and stamp duty
- finance costs;
- fuel costs;
- maintenance, servicing and repair costs; and
- cleaning costs;
If you use the log book method you will need to keep a log book as well as all of your receipts (although you can estimate petrol and oil costs). If you haven’t kept these receipts and can’t get copies of them you may need to use the other method.
We would recommend that you take the time to keep all your receipts and do a log book so you can see which method gives you the best result. You can work this out after the end of the year once you have the final km for the year.
Should I register for Goods and Services Tax (GST) or an Australian Business Number (ABN) or start a separate legal entity like a company?
We recommend you speak to your accountant about registering for GST, starting a corporate entity or registering an ABN. As with income tax, there's no one-size-fits-all solution. Your accountant will be able to provide you with professional advice for your individual situation.
What should I do?
- The Australian Taxation Office recommends keeping records of income and expenses regardless of how much you earn. This means receipts, invoices, odometer readings, and records of any expenses related to your car, including receipts for fuel, servicing, tyres and cleaning. This can be in electronic form.
- If you're not sure about your tax obligations, speak to your accountant.
Interested in renting out your car? Get your car earning money for you now!
List your car on Car Next Door