If you use your car for a mix of work and personal purposes, or provide your employees with a passenger vehicle, you may be aware of the logbook method as one of the ways to calculate the work-related portion of your motor vehicle costs.
While a logbook can be slightly time consuming to create, it generally allows for a higher deduction than the alternatives. A taxpayer can work out a business percentage by maintaining a logbook which can then be used to claim a portion of all motor vehicle expenses. This includes depreciation on motor vehicle, fuel, repairs, and insurance etc.
Inclusion of these additional expenses means choosing the logbook method can result in significantly higher deductions for the taxpayer than using the other available methods, especially for taxpayers with high motor vehicle usage. These effects can be further exaggerated in financial years with newly purchased motor vehicle or substantial repairs and maintenance.
For employees and sole traders, this means a greater deduction in their tax return. Even employers’ logbooks can often result in a lower fringe benefits tax, where applicable.
Once created, a logbook is generally valid for 5 financial years. This validity changes if there are substantial changes in the users’ circumstances.
How to properly maintain a logbook
A valid logbook is maintained over a continuous 12-week period where every trip is recorded. The following information must be included,
- Date – A valid logbook must record the date of each journey.
- Odometer reading – The logbook entry must record the car odometer readings at the beginning and end of each journey.
- KMs travelled – The logbook entry must record the number of kilometres travelled during each journey.
- Purpose – The logbook entry must record the purpose (or purposes) of the journey.
The description should provide sufficient evidence of the journey’s business nature and correlate it broadly with the distance travelled. It will not be enough merely to indicate that the journey is for “business”.
The type of journey involved, and whether it is of a kind generally associated with the employee’s duties of employment (or otherwise), will be a relevant consideration in determining the extent of detail required.
Generally, creating a logbook involves a fair bit of work. However, once a logbook is created, it is valid for 5 years.
Additionally, there are numerous tools available for this. We have included a list of ATO compliant apps which can help in this process.
- myDeductions – This app is created and maintained by the ATO. In addition to helping in creating your logbook, the app also allows you to record other deductions throughout the year. It has 3 tracking options to record trips including for additional flexibility.
- GoFar – This app automatically records every trip made with your car. It also allows you to create custom reports.
- Drivers note – this app is one of the most popular in the market for maintaining a logbook. It has over 70,000 app reviews and is rated 4.6 out of 5 stars.
If you have any questions about maintaining a valid logbook, please contact us.
