If you’re wondering “why do I need a logbook?” for your business vehicle, the answer lies in how you claim car expenses with the ATO—and how much tax you might be missing out on.
Understanding the Logbook Method
The Australian Taxation Office (ATO) allows business owners to claim car expenses and deductions for cars using two primary methods (Source: ATO):
- Cents per Kilometre Method: You can claim up to 5,000 business kilometres per car, per year, at a set rate (currently 85 cents per kilometre for the 2023–24 income year).
- Logbook Method: This method requires you to keep a detailed logbook for a continuous 12-week period, recording all business-related car journeys. The logbook helps determine the business-use percentage of your car, which you can then apply to your actual car expenses.
Why Keeping a Logbook is Beneficial
- Maximised Deductions: If you drive more than 5,000 kilometres for business purposes annually, the logbook method often results in higher deductions compared to the cents per kilometre method.
- Comprehensive Expense Claims: This method allows you to claim a portion of various car expenses, including fuel, maintenance, insurance, registration, and depreciation.
- Long-Term Validity: Once you’ve maintained a valid 12-week logbook, it remains valid for five years, provided your usage patterns don’t change significantly.
Check out this guide from the ATO on deductibles
How to Maintain a Valid Logbook
To ensure you can claim car expenses and your logbook meets ATO requirements:
- Duration: Keep a logbook for a continuous 12-week period that accurately represents your car usage throughout the year.
- Details to Record:
- Start and end dates of the logbook period.
- Odometer readings at the start and end of the period.
- Total kilometres travelled.
- For each journey:
- Date.
- Start and end odometer readings.
- Kilometres travelled.
- Purpose of the journey (e.g., client meeting, business purchase).
- Annual Odometer Readings: Record your car’s odometer reading at the start and end of each financial year. Reference ATO Records Required for Tax Deduction
- Vehicle Details: Note the make, model, engine capacity, and registration number of your car. Source ATO Work Related Car Expenses
Common Questions
Q: Can I use the same book for multiple cars?
A: No, you must maintain a separate logbook for each vehicle. If you’re using the logbook method for multiple cars, ensure each book covers the same 12-week period. Source – ATO Logbook Method
Q: What if my business usage changes?
A: If there’s a significant change in your car’s business use, you’ll need to start a new 12-week book to reflect the new usage pattern.
Q: Can I keep an electronic logbook?
A: Yes, the ATO’s myDeductions tool allows you to maintain an electronic logbook, making it easier to record and store your car usage data. Check out this guide from the ATO on myDeductions.
Final Thoughts
Maintaining a logbook might seem tedious, but it’s a valuable tool that can lead to significant tax savings for your business. By accurately recording your car usage, you ensure compliance with ATO regulations and maximise your eligible deductions.
If you’re unsure about how to start or maintain a logbook, or if you want to discuss the best method for claiming car expenses for your business, we’re here to help.
Book a free discovery session at amarose.com.au and let’s ensure you’re on the right track.
Disclaimer: This article provides general information and does not constitute financial advice. For personalised advice, please consult with Amarose Accounting or a qualified tax professional.
