The suburbs claiming the biggest tax breaks for car-related expenses

Taxpayers in Sydney’s wealthy coastal suburbs and its north-western postcodes make the city’s biggest average deductions for work-related car expenses while inner west neighbourhoods that are well serviced by public transport claim the least.

Analysis of Tax Office data also reveals Sydney’s outer suburban postcodes had the highest proportion of taxpayer claims for car-related expenses, but they tended to be smaller on average than in many affluent suburbs close to the central business district.

The top postcode for work-related car expenses was the high-income neighbourhood of Kenthurst-Glenhaven-Annangrove (postcode 2156) with an average of $4111; next was Bondi Junction-Queens Park (postcode 2022) at $3882 and Hunters Hill-Woolwich (postcode 2110) with $3876, the research by KPMG shows.

Of the 15 Sydney postcodes where taxpayers made the biggest average work-related car expense claims, nine were in the eastern suburbs or the northern beaches including Coogee, Woollahra, Bellevue Hill, Newport and Avalon.

KPMG urban economist Terry Rawnsley, who did the analysis, said wealthier households tended to cluster in areas that might prioritise space and lifestyle amenities over public transport accessibility.

“Despite their relative proximity to jobs, some affluent inner-city suburbs have poor public transport options. But because residents tend to have higher incomes, they can afford to travel by car rather than rely on public transport,” Rawnsley said.

A preference for car use over public transport in some wealthy areas might also influence the average size of expense claims for vehicle expenses.

“Social norms differ,” said Rawnsley. “Some people say ‘I just want to drive around in my car, and I’d never catch a bus or a train’ while others think, ‘Well, what’s the quickest journey I can take? Is it the train or the bus or the car?’.”

Postcodes with the highest proportion of taxpayers claiming deductions for work-related car travel were in south-western Sydney and on the Central Coast.

“Western Sydney residents still rely on a car for their work-related travel, often in nearby locations but if they are trying to access the CBD, they are likely to drive to a train station to avoid the toll roads and parking to get to work,” Rawnsley said.

“Dural and Kenthurst are particularly interesting as they are rural residential areas, distinct from inner-city or coastal suburbs, yet they exhibit high work-related car expenses.”

The analysis focused on the Sydney basin and the Central Coast and did not include some postcodes in the city’s outer west and outer south-west. Postcodes with fewer than 500 taxpayers claiming work-related car expenses were excluded.

Work-related car expenses refer to costs incurred by a taxpayer when using their own car for employment purposes. These expenses can be claimed as tax deductions if the travel directly relates to earning an income. However, commuting between home and work is generally not deductible unless the travel meets specific exceptions, such as carrying bulky tools for work.

A cluster of inner-west suburbs had Sydney’s smallest average tax deductions for work-related car expenses despite having relatively high incomes. Petersham-Lewisham (postcode 2049) was lowest at $2317. Camperdown (postcode 2050) and Ashfield (postcode 2131) were the next lowest with $2460. Most inner west suburbs also had a relatively low proportion of taxpayers making claims for work-related car expenses.

One reason for this is the good public transport options available in the area.

“These suburbs are well-connected by train to both the CBD and Parramatta, making it easier to use public transport than to drive a car,” Rawnsley said.

But even within the inner west, there was a big divide at Parramatta Road, where suburbs to the north have poorer access to public transport and claim more on the car compared to suburbs to the south, which are serviced by the T2 and T3 heavy rail lines.

“The opening of the West Metro would likely change this pattern as those postcodes north of Parramatta Road have a step change in access to public transport,” Rawnsley said.

Sydney’s occupational mix was also a factor in patterns of work-related car expense claims.

“Some locations may have a larger share of workers, such as professionals, who often travel for work, compared to other locations that may have a greater share of workers, such as teachers, who travel less for work purposes,” said Rawnsley.