How to Claim Car Expenses Using the Log Book Method

Who doesn’t want to get a bigger tax refund? Just imagine how you and your family could use the extra money.

If you use your car for work-related purposes, you probably already know that you can claim for car-related expenses when you fill in your tax return.

However, you may not know that if you use your car a lot for work purposes, then you can generally get a bigger tax refund by using the logbook method as opposed to the cents per kilometre method.

So why is this?

It’s because the logbook method enables an individual to claim for all their car expenses (fuel, oil, maintenance, depreciation, etc ). The other method entitles you to claim for a maximum of 5,000 business kilometres per year at a set rate per kilometre (currently this is 72 cents) which means you miss out on claiming for other expenses related to your car.

How the logbook method works

Under the logbook method, you need to record every trip you make in your car – business and personal – for 12 consecutive weeks. The logbook is then used to ascertain the ‘business-use percentage’ of your vehicle.

The business-use percentage equates to the percentage of kilometres that you spend travelling in your vehicle for work-related journeys. It’s also the percentage of all of the vehicle expenses paid by you during the year that you’re entitled to claim on your tax return.

In addition to keeping a logbook, which you can get from most stationers, you also need to keep:

  • Receipts for your fuel and oil use or estimates taken from your odometer readings
  • Evidence of all other car expenses

 

So, what needs to be recorded in the logbook? Let’s jump in and take a look …

How to fill in your logbook

Remember, to record every trip you take, not just business trips.

The logbook must include the following details for each journey:

  • The date
  • Start and finish time
  • Odometer readings for the start and finish
  • Total kilometres travelled
  • Reason for travel

In addition, for the logbook period you must include:

  • A start and finish date
  • Odometer readings for the start and finish
  • Total number of kilometres travelled
  • Business-use percentage

Logbook time frame

While it may sound like a lot of effort, it’s not so bad when you consider:

(a) You only need to do the logbook method once every 5 years

  • Each entry should take you no more than 30 seconds and getting a bigger refund at tax time will make all that effort seem worth it.

Our top tip – If you have a vacation booked within the next 12 weeks, don’t make the mistake of starting your logbook. You’ll end up booking less work-related kilometres than normal which means your refund won’t be as big.

So now you know what to record in your logbook what sort of amount could you claim?

How to work out your claim

To work out how much you can claim, you need to take the following steps:

  1. Keep a logbook for 12 weeks
  2. Calculate your business-use percentage by dividing the number of kilometres travelled for business purposes by your total kilometres and multiply by 100
  3. Add up all of your car expenses for the income year
  4. Multiply the total of your car expenses by your business-use percentage

As an example – Travelling for work

Say, at the end of your income year, your logbook shows a total of 12,000 kilometres travelled. Of these, 7,600 were kilometres used for business journeys. To work out the business-use percentage (as detailed above)

7,600 ÷ 12,000 x 100 = 63% of travel used for work-related purposes

Now, say your total car expenses amount to $9,000 for the income year, you can work out how much to claim as a deduction with the following calculation

$9,000 x 63% = $5,670

The takeaway

One of the biggest advantages of the logbook method is that you can claim for more than just your fuel costs. But always bear in mind that your car expenses must be legit, and you need proof to submit to the ATO. Using the logbook method you can maximise your tax refund and have a few more dollars in your pocket. Who wouldn’t want that?

If you need any help with filling in your logbook correctly, don’t hesitate to get in touch with the friendly team at JSM Accounting by calling 07 3814 6512.