The car logbook method is a good way to track your car expenses and claim them on your tax return (to increase your tax refund)
If you use your car for work purposes, the ATO will let you make a claim on your tax return for some car-related expenses. (Special note: You can only claim expenses for a car you own).
Is the logbook method right for you?
Generally speaking, if you use your car a lot for work, the car logbook method will get you a bigger tax refund than the cents per kilometre method.
Why? Because claiming using a logbook allows you to claim a percentage of all of your car expenses (fuel, registration, maintenance, interest on loans etc.) The other method of claiming car expenses (cents per kilometre) allows you to claim a set rate for fuel only. This means you miss out of claiming for all other car related expenses.
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How the logbook method works
The logbook method involves recording every trip in your vehicle (both private and business) for a 12-week period. Your logbook is then used to calculate the “business use percentage” of your car.
Your business use percentage is the percentage of kilometres you travel in your car for business related purposes. It’s also the percentage of all of your car expenses you paid during the year that you can claim on your return.
By keeping a car logbook, it’s easy to calculate your business use percentage and easy to provide evidence as required by the ATO.
It’s important to record every trip you make in your car for 12 weeks – not just work trips. If you don’t do this, the ATO will consider your logbook as invalid and may reject all of your car expense claims.
How long is my car logbook valid for?
Although it takes a bit of patience to get going, you only need to do a logbook once every 5 years. As long as your driving habits remains consistent each year you can use that logbook on for five years’ worth of tax returns.
This makes the car logbook method really quite convenient to use. Even if you get a new car during that 5-year period, you can continue to use the old logbook as long as your work-related use hasn’t changed up or down.
Car logbook template
A car logbook can help you get the most from your legitimate work-related vehicle use. Download this free car logbook template so you can keep track of each business trip you take.
How to complete your logbook
To work out your business use percentage, you need to keep a logbook for your car for a “typical” 12 week period. These must be 12 consecutive weeks (i.e. 12 weeks in a row).
Your logbook must include every trip you take – not just your business related trips.
The logbook must include the following details:
- date for each journey
- start and finish times for each journey
- start and finish odometer readings for each journey
- total number of kilometres for each journey
- reason for each journey
- start and finish dates for the logbook period
- start and finish odometer readings for the logbook period
- total number of kilometres travelled during the period
- business use percentage for the period
Does the logbook method sound like a lot of effort?
It’s not really when you think about it. Each entry takes literally 30 seconds and when you get a bigger tax refund at tax time you’ll be glad you took the time!
Etax Special Tip: Don’t start your logbook if you have holidays coming up in the next 12 weeks. You’ll end up recording less work-related kilometres than usual and your refund won’t be as big!
If you would like help to make sure you fill out your logbook correctly, don’t hesitate to get in touch with us via Live Chat or Secure messages from within your Etax account.
How to calculate your business use percentage
Once you’ve completed your 12 week logbook, you’ll be able to calculate your car’s business use percentage.
To do this, divide your business use kilometres by your total kilometres, then multiply by 100.
So, for example, if you travel 4,000 kilometres in total for the 12 week period, and 2,200 of these were for business-specific purposes, you would do the following calculation:
2,200 ÷ 4,000 × 100 = 55%
In this example, your car’s business use percentage would be 55%. This means that you could claim 55% of all your vehicle expenses for the financial year.
What sort of vehicle expenses can you claim?
One of the greatest benefits of choosing the logbook method over the more basic cents per km method is that you can claim more than just the cost of the fuel you use. So, what are “vehicle expenses” in the eyes of the ATO when using the logbook method?
Vehicle expenses include:
- running costs such as fuel, oil, and servicing
- vehicle depreciation
Vehicle expenses do not include:
- the purchase cost of the car
- parking tickets, speeding and other fines
Remember: record, record, record!
Of course, it’s not just your logbook records that you need to keep in order to maximise your car expenses claim in your tax return. You must also keep written evidence (such as receipts) of all the car expenses you are claiming. (Those items in the list above).
Always remember: Your car expenses claims cannot be guessed or made-up. They must be legitimate, and you must have evidence of them. If you stick to the rules and use the logbook method for claiming your car expenses, you can maximise your tax refund without having to worry about the ATO becoming a back seat driver.
What other methods are there for calculating vehicle expenses?
Cents per kilometre method
The other method the ATO allows for car expenses is cents per kilometre where you can claim 68c per kilometre up to 5000km per year. This method is ok for people who use their car sporadically during the year.
But, if you drive more than 5000km during the year, you are costing yourself valuable tax refund dollars if you don’t keep a logbook.
If you’re not sure which is the best method for you, ask us and we can steer you in the right direction!
One-third of actual expenses method
The ‘one-third of actual expenses’ and ‘12% of original value’ methods were abolished from 1 July 2015. For claims in earlier income years, see Can I Claim My Car Expenses Without a Logbook?
Other posts on tax deductions: