Can you use your private car, ute or van for work?

A vehicle that you use for business purposes doesn’t have to be owned by the business. It doesn’t even have to be owned by you (although, that would mean that you can’t personally claim any expenses on that vehicle that are work-related). These vehicles belong to the ‘grey fleet‘.

It’s possible to use your private vehicle for work, but there are some taxation and insurance obligations.

Insurance

Your private motor vehicle insurance will not cover all work-related travel; if it covers any at all, it will be to and from your office and for travel to and from meetings where you are not carrying goods or making sales (i.e. it’s you and the car heading to a meeting). There may also be limits on how much this can be used. Make your insurance company aware and ask them to write it into your policy.

Most insurance companies separate business cover from personal cover and there will be a different policy which addresses the risks of business travel. The types of driving that insurance companies usually expressly forbid on a private insurance policy are:

• Driving for hire or reward (e.g. taxi, Uber, courier)
• Driving instructor
• Real estate agent
• Mobile mechanic
• Sales
• Carrying or towing goods in relation to a trade or business.

It’s best to talk to your insurance company to determine what you can get away with. For example, a property investor who visits their property once every three months to do an inspection will almost certainly be covered as the risk and usage is so low, but a person using their car to tow a trailer and carry gardening waste from a landscaping business almost certainly won’t be covered.

The reason why private insurance doesn’t cover you is:

• You are likely to be carrying goods which are attractive to thieves
• You are spending more time on the road, which increases the general risk
• You are driving during work time where traffic is likely to be heavier and you are likely to be distracted
• You are likely to visit a larger number of sites that are unfamiliar to you, increasing the risk of damaged.

If you have a sign-written vehicle and you are in a crash, but you only have private insurance, this could create a problem for you.

Tax obligations

If you use your personal vehicle, there are three ways of dealing with it:

1. Claim actual costs – you’ll need to keep accurate records of private vs work-related expenses.
2. Keep a logbook for every journey and claim the government-approved cost per kilometre.
3. Use a flat rate for calculating usage – this is 25% at the time of writing.

It’s best to talk to your accountant about which one works best for you.

Fringe benefits tax

Fringe benefits tax applies in the opposite scenario: you are using a work vehicle supplied to you for personal reasons. In this case, you need to pay tax for the benefit you receive from the vehicle. It’s best to contact your accountant. If you have your own business, then you would make income tax and GST adjustments for using a private vehicle.