Having your log books in order is one way to ensure that you are able to accurately calculate your work related or business related use of your vehicle and avoid the wrath of the ATO.
Until recently there were multiple methods permitted to calculate work related expenses but these have now been reduced to just two. The methods now permitted are the cents per kilometre method and the log book method. For anyone who uses their vehicle a fair bit for work the latter is always likely to yield the bigger tax deduction. And when it comes to tax deductions … bigger is most definitely better !
If you are using the log book method it is important to know what records the Australian Taxation Office (ATO) expects you to keep:
We know that mentioning log books causes a communal groan Australia-wide as we know how tedious a task this can be. It is, however, critical that log books are kept and able to be provided in the event of an audit to substantiate the tax deductions you are claiming in respect of your motor vehicle expenses. An estimate is simply not good enough and will not be accepted by the ATO.
It really isn’t that bad though as you only need to keep a log book for a 12 week period once every 5 years or where there is a significant change in the pattern of use. We have underlined this because you are not permitted to rely on a log book that is no longer representative of the current use of your vehicle.
One bit of good news though …. You do not need to do a new log book when you acquire a replacement vehicle as you can simply elect to apply your current log book to it as long as it is within the 5 year timeframe mentioned above.
Whilst the traditional paper log books are definitely accepted, there are several options when looking at electronic log books.
SMART PHONE APPS – These can be downloaded and used by yourself or your drivers, utilising the phone’s GPS to log trips. You will need to ensure that the app is ATO compliant, some that we suggest are:
WEB BASED DATABASE SYSTEMS – For businesses these can be used to upload log books securely into an online database which can then be accessed by the appropriate people within your organisation.
Using the log book method allows you to claim the business-use percentage of each car expense, based on the log book records of your car’s usage. This came be completed in 3 easy steps:
STEP 1: Divide the distance travelled for business by the car’s total distance. Multiply this result by 10
STEP 2: Determine your total expenses for the income year
STEP 3: Multiply your total expenses by your percentage found in Step 1 to find the total amount you can claim
Whilst we can certainly assist you with this, it is important that you are aware of the above, because it may entitle you to claim far more than what the cents per kilometre method can allow. Most importantly a valid log book is the difference between having your claim accepted or denied by our friends at the ATO.
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