Keeping a logbook can often (but not always) provide the largest tax deduction for those who drive for work.
Taxpayers can choose the best method that they are allowed to use, in order to claim travel for work purposes (ie. there is no harm in keeping a logbook, except for the time it takes to record).
How much do you travel?
If you travel less than 5,000 business kilometres per year you can choose either the cents per kilometre method or the logbook method (provided you have a valid logbook).
If you travel more than 5,000 business kilometres per year you can use the above methods or 1/3 of actual expenses or 12% of original cost of the car (for more on these methods search ‘ATO car expenses’).
Starting a logbook
To claim your motor vehicle expenses under the logbook method you need to keep a logbook for at least 12 continuous weeks.
There are apps you can use to keep a logbook or you could simply download an Excel template online or even create your own (whether from Excel or Word or just handwrite a logbook).
What are the requirements of a logbook?
A logbook requires you to keep track of your business trips:
- Starting and closing logbook dates
- Starting and closing odometer readings for your car for the logbook period
- Total kilometers travelled
- Business kilometers travelled each trip (and total business kilometres for the logbook period)
- The business use percentage (calculated as total business kilometres divided by total kilometres)
A logbook doesn’t require you to keep track of your personal trips but you need the total kilometres travelled for the period (via the opening and closing odometer readings for your car) so that a business percentage can be calculated.
A logbook lasts for 5 years under the same circumstances
After you have filled out your logbook for 12 or more weeks, the logbook can then be kept for 5 years (assuming the percentage of work or business trips doesn’t change substantially).
If your circumstances change substantially (eg. you only do half as much driving for work) or after 5 years, you are required to keep a new logbook for 12 weeks to establish a new fair percentage.
Logbook method – what can you claim?
Using the logbook method you claim your total car expenses x the logbook business percentage (calculated over 12 weeks of driving).
Car expenses include what I call:
- Cash expenses, and
- Non-Cash expenses
Cash expenses eligible for the logbook method include car expenses like:
- Insurance (CTP and comprehensive)
- Repairs and servicing
- Other expenses (oil, coolant etc.)
In addition to the cash expenses, you can also claim a logbook percentage of non-cash expenses:
- Depreciation on the car
- Interest on a lease/hire purchase agreement