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Are fines tax deductible?

If you can claim other car expenses spent during the course of earning an income, can you do the same with traffic penalities? (Images: Getty)

You are driving out to see a client from the office. 

The travel has been performed during the course of generating income, so you know certain vehicle expenses and depreciation can be claimed.

But the meeting runs for two hours even though the car was parked in a one-hour limited spot.

The dreaded flap of a parking ticket greets you as you return to the car.

You cop the mistake and pay the fine.

This is a car-related expense while doing work. So the fine should be claimable as an expense, right?

Unfortunately, that idea is too good to be true.

"There are no tax deductions for fines," CA ANZ Australian tax leader Michael Croker told Yahoo Finance.

"Section 26-5 of the Income Tax Assessment Act 1997 specifically makes penalties or fines imposed as a result of breaches of an Australian law non-deductible."

UNSW Taxation and Business Law professor of practice Jennie Granger agreed.

“Sorry, even if you have a good work related reason for speeding or parking in that loading zone you can’t claim the fine,” she said.

“And before you ask you cant claim any tax deductions for costs you incur earning income from illegal activities either.”

According to Will Davies, chief executive of car-sharing platform Car Next Door, other car-related mistakes to look out for on your tax return include:

  • Claiming normal travel to and from work: NOT allowed

  • Claiming carrying work equipment when it's not required by employer: NOT allowed

  • Claiming expenses related to a company car or leased car: NOT allowed

  • Claiming cents-per-kilometre without records to prove the distances: NOT allowed

  • Claiming depreciation on the value of the car: IS allowed

  • Claiming expenses for renting out car: IS allowed

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