If you are required to drive for everyday work purposes, you may be able to claim special deductions for that usage using a set kilometer cost or tax logbook. While you usually can’t claim for the purchase of a car, and cannot claim for your private usage to and from your workplace, you can also claim the cost of things such as:
- Trips between your home or office and other places for business purposes;
- Fuel and oil;
- Repairs and servicing;
- Interest on a motor vehicle loan;
- Lease payments;
- Insurance and registration.
For businesses, they can typically claim motor vehicle expenses for vehicles owned or leased by the company for everyday business use. This can include costs of providing the vehicle to an employee as part of their employment, such as those with travelling sales personnel. However, should any employee use that vehicle for private purposes, the company must pay fringe benefits tax (FBT).
There are two ways to record and claim for business journeys. Each method has benefits and restrictions, so it’s best to ask your accountant which method suits your individual usage. Our seasoned tax team at Online Tax Return can help you to sort out the rest of your taxes at the same time!
Method 1: Cents per Kilometre
To use this method, you do not need written evidence, however may be required to show how you worked out business kilometres through diary records of work-related trips or similar.
- Your claim will be based on a set rate for each business kilometre; and
- A maximum of 5,000 business kilometres can be claimed using this method.
Method 2: Tax Logbook
If it’s one thing we humans can’t stand, it’s process. We hate it. Unfortunately, life seems to be full of it – from insurance forms to Facebook profiles, we are forever filing out our information. Keeping a tax logbook may seem to be just another thing to fill out, but they can make a major impact on your tax return this financial year.
By keeping accurate records of your business car usage, you can avoid missing out on maximising your tax return, and avoid errors being picked up in audit.
Here are some useful tips on how best to keep a tax logbook for your business car use.
What to Include in your Tax Logbook
- Dates of the logbook beginning and end;
- Car odometer readings from both the start and end date;
- Car odometer readings from the start and end of each income year you use the logbook method;
- Total number of kilometres the car travelled during the logbook period; and
- Details for each journey showing:
- The start and finishing date of each journey;
- Odometer readings at start and end of the journey;
- Total kilometres travelled during journey; and
- Specific reason for journey – note that “business” or “miscellaneous business” will not suffice, so be clear.
Requirements for your Tax Logbook
- Keep it for a minimum of 12 continuous weeks
- This will be representative of your business travel throughout the rest of the year
- Reflect business use
- Accurate odometer records
- This is crucial for working out the total distance travelled during the year
- It will be valid for five years
- A new logbook should be started any time should there be changes to business usage.
In the case where you use two or more cars to claim on income tax, you must keep a tax logbook for each individual car covering the same period. If you use the logbook method to claim on FBT for multiple cars provided by your employer, you must keep a tax logbook for each individual car.
How to Record your Tax Logbook
You have a few options on how best to record all the data you need.
For those who are digitally inclined, the ATO have developed a smartphone app that holds the myDeductions tool. This tool helps users capture receipts for work-related car expenses and logbook information on their phone on the go. This is a great choice for people claiming for income tax, however it may not have the capability required for FBT purposes.
For more information and to download the app, go to myDeductions.
Otherwise, you can purchase ready to go vehicle logbooks from most stationery and office stores around. This way, you can choose the size, binding and backing to suit how you use your logbook. They’re usually not more than $10, but make sure you keep that receipt to claim back! There are also templates available online to make up your own.
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice.