Have you started riding your personal bicycle to work or using one as part of your day job? If so, you may be wondering if you can claim your bike expenses on tax. The answer is you most certainly can. But you have to follow the specific criteria laid out by the ATO to enjoy the tax benefits.
Here is what you need to know about claiming your bike expenses on tax.
Understanding Vehicle Categories
First you need to understand how the ATO classifies a bicycle. To make this process easy the ATO has clear guidelines to differentiate between cars and other vehicles. According to the ATO website, a vehicle is not considered to be a car if it is:
A vehicle with a carrying capacity of one tonne or more, such as a utility truck or panel van
A vehicle with a carrying capacity of nine passengers or more, such as a minivan
You will notice that none of these categories apply to a bicycle. So what does this mean? You cannot claim a bicycle on tax the same way you would for a car, utility track or panel van. This makes sense because a bicycle doesn’t have the same running expenses like fuel, oil, insurance or registration.
Therefore, you need to take a different approach.
Fair Grounds for Tax Claims
Below are the two most common ways you can claim a bicycle on tax.
Generally speaking, you cannot request a tax exemption for normal trips between home and work.
However, the ATO does have a few exceptions to this rule. You may be able to claim deductions if you’re using the bike to travel from one workplace to another (i.e. a second job, other worksite), to visit clients or collect supplies to complete a job.
This is allowed because you’re using a bicycle to travel during work hours, instead of relying on catching public transport or hailing a taxi – which are both tax deductible.
If you are required to use a personal bicycle to perform your job, then you can claim it on tax. This means using a personal bicycle is directly related to earning your income. For example, if you work as a park ranger and a bicycle is the most effective way to get from A to B.
Keep in mind, you can only claim a bicycle on tax if you used your own money to buy it, and you were not reimbursed by your employer. And you need to have records to prove you made the purchase yourself.
Calculating Your Tax Claim
For tax purposes your bicycle is viewed as a business asset. That’s why you should use the depreciation method to calculate the cost of your claim. This means you are calculating the cost of the asset over its entire lifespan.
To do this you just need to follow a simple step-by-step formula:
1. Calculate the Depreciable Cost: Enter the purchase price of the bicycle. Then minus the ‘salvage value’ from the purchase price of the bicycle. The ‘salvage value’ represents the value of an item after it exceeds the average lifespan. (e.g. if the purchase price of the bicycle was $800 and the salvage value was $150, then the depreciable cost would be $650)
2. Enter the Lifespan: Find out how many years the bicycle will expect to last. Based on the quality of the bicycle this could range from 5-10 years or longer.
3. Calculate the Depreciation Value: Divide the depreciable cost by the lifespan of the asset. (e.g. if the depreciable costs was $650 and the average lifespan 7 years, the depreciation value you claim each year would be $92.85.)
Finally, any costs that you incur on top of the depreciation – general repairs and parts replacements – you can claim the total cost of as they occur.