Are you currently using your vehicle for work-related purposes or business activities?

If you do, then you should be keeping a detailed record of your vehicle-related expenses to optimise your tax deductions.

Keeping an accurate and up-to-date vehicle logbook can prove invaluable during a tax audit, potentially saving you both time and money. But what exactly is a vehicle logbook, how should you fill it out correctly, and how can it contribute to maximizing your tax savings?

Understanding a Car Logbook:

A vehicle logbook is a thorough and precise record documenting the use of your vehicle over a specific period. Usually spanning a continuous 12-week period, the logbook should include the following details:

  • Every trip taken
  • Date of each trip
  • Odometer readings at the trip’s start and end
  • Purpose of each trip
  • Total kilometers traveled per trip
  • Cumulative kilometers covered during the recording period

Maintaining an accurate logbook is essential for those aiming to claim vehicle expenses using the logbook method. It serves as evidence for the Australian Taxation Office (ATO) to determine the portion of vehicle usage related to business activities, a crucial factor in maximising tax returns.

It’s important to note that a logbook remains valid for five years, but a new one may be required if there’s a significant change in usage patterns.

Valid Work-Related Car Trips:

Determining which vehicle trips qualify for tax purposes is essential. Generally, daily commuting from home to a regular workplace is not deductible, as it is considered a private activity. However, trips between multiple work sites during the workday are eligible for deduction. Valid work-related vehicle trips also include:

  • Business meetings, client visits, and work-related conferences
  • Transporting bulky equipment required for your job
  • Errands for the business, such as banking, post office visits, or purchasing office supplies

ATO Methods for Claiming Work-Related Car Use:

The Australian Taxation Office (ATO) provides two primary methods for claiming work-related vehicle expenses:

  • Cents Per Kilometre Method:
    • Simple and straightforward
    • Allows a claim of 72 cents for each work-related kilometer, capped at 5,000 kilometers annually
    • Doesn’t require a detailed logbook
  • Logbook Method:
    • Detailed and comprehensive
    • Requires keeping a logbook to determine the work-related percentage of vehicle usage
    • Allows claiming various motor vehicle expenses, including depreciation, running costs, registration fees, and insurance premiums

Creating a Motor Vehicle Logbook:

Creating a logbook can be done using various formats, such as an Excel spreadsheet, paper diary, or an account book. All methods are accepted by the ATO, as long as records are kept up-to-date, clear, and accurate.

The Importance of a Valid Motor Vehicle Logbook:

Maintaining a valid motor vehicle logbook is crucial for accurate deduction claims. While initially seeming challenging, recording your trips becomes straightforward with consistent record-keeping habits. A higher work-use percentage in your logbook translates to greater deductions.

For a smooth deduction process, it’s recommended to:

  • Keep copies of receipts, preferably in a photo format to prevent fading
  • Retain copies of all bills related to your vehicle
  • Submit all documents and receipts to your accountant at the end of the financial year

For more information on the benefits of creating a motor vehicle logbook and maximising your tax return, reach out to Holden Accountants, where a team of experienced professionals can provide valuable insights.