Can I claim petrol on my tax return?

Fuel costs are a weekly – sometimes daily – reality for Australian car owners. As petrol and diesel prices continue to spike, many are looking to mitigate the cost of their commute.

With the end of the 2022–23 financial year upon us, one way to counteract rising automotive expenses is to claim any of your work-related fuel expenditure in your annual tax return.

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But what constitutes 'business-related' fuel costs? And how do you accurately claim petrol costs in your tax return?

We tapped Mark Chapman, Director of Tax Communications at H&R Block, and Elinor Kasapidis, Senior Manager of Tax Policy at CPA Australia, for answers.

Yes! As long as the journey was work-related and the cost complies with the three golden rules of deductions.

"The ATO has its golden rules of deductions, and one of them is you can’t have been reimbursed by your employer or anyone for the cost – you have to have incurred the cost out of your own pocket. No double-dipping," Ms Kasapidis told Drive.

"The expense also has to be directly related to earning your income."

With that in mind, employees can claim their petrol costs for any work-related journeys... but that doesn't mean your commute.

"Travel to and from your regular place of work is generally not claimable," Ms Kasapidis says.

Instead, work-related travel typically includes travel from your normal workplace to another workplace, travel between various work sites and travel that involves carrying bulky tools or equipment for your employer.

Of course, the rules will vary based on your individual circumstances, so be sure to read the fine print (more information is available at this link).

The third golden rule of tax deductions is that you have to have records to prove you incurred the expense – so make sure you hold onto your receipts and keep records of your work travel. Which brings us to...

There are a few ways to calculate the business-use portion of your automotive expenses, including petrol.

The logbook method requires you to keep a 12-week logbook of your distance travelled, your business/personal usage split, plus evidence of your fuel and oil costs, and proof of all other car expenses.

Meanwhile, the cents per kilometre method is better suited to people doing less work-related car travel and uses a flat rate for each kilometre travelled for business. For the 2022–23 financial year, that flat rate is $0.78/km.

Finally, the actual costs method requires you to keep all your receipts and maintain extensive record-keeping.

"If you’re claiming [petrol costs] using the logbook method, either claim actual petrol costs for your work journeys (remember to keep receipts!) or you can estimate petrol costs by multiplying average fuel consumption for the car (from the Green Vehicle Guide) by average fuel price (from the Australian Institute of Petroleum website)," Mr Chapman explains.

"Petrol is already included as a component in the cents per kilometre method (currently 78 cents per kilometre), so a separate claim is not possible if you’re using this method."

Regardless of which method you choose, ensure you keep extensive records in case you're asked to prove how you worked out your business-use split.