The importance of keeping an updated motor vehicle logbook

As a small business owner, you are able to claim a tax deduction for motor vehicle expenses associated with running your business come tax time.

There are two methods you can use to calculate your car expense claims on your tax return:

  1. Cents per km method
  2. Car Logbook method

In this article, we’ll look at the logbook method and explore the importance of maintaining a meticulously updated logbook. Through your logbook you can claim all expenses that relate to the operation of your car at your percentage of business use.

Here are 6 key facts you need to be aware of when using a logbook to claim motor vehicle expenses:

  1. 12 week continuous period: According to the ATO, your logbook must cover a continuous period of at least 12 weeks. This means consistent tracking of all your business-related travel over this period. Start by recording the date of each trip, the purpose (e.g., client meetings, deliveries), the trip start and end odometer readings, and the distance travelled.
  2. The five year rule: Once you’ve completed your 12-week logbook, it’s crucial to retain it for a minimum of five years. This ensures that you have documentation to support your tax return in case of an audit by the ATO. Keep your logbook in a safe and easily accessible place along with your other tax records.
  3. Accuracy is Key: Your logbook should accurately reflect your business-related travel. Avoid estimates or rounding figures, as the ATO requires precise records for deduction claims.
  4. Technology is your friend: Embrace technology to streamline the logbook process. There are numerous apps and software available that can automatically track your trips using GPS, making it easier to record details such as dates, distances, and purposes. Utilising these tools can save you time and ensure your logbook is accurate.
  5. Business vs. Personal Use: Remember to differentiate between business and personal use of your vehicle. Only trips directly related to your work or business activities are eligible for deduction claims. Be diligent in recording your travel accurately to avoid potential problems later.
  6. Review and Adjust: Regularly review your logbook to ensure it reflects your current circumstances. If there are significant changes in your business-related travel habits, such as increased client meetings or a change in vehicle, you may need to start another logbook.

Good and accurate record keeping will help to ensure you comply with the ATO’s regulations and will safeguard you from potential penalties or disputes. By following these key facts and maintaining an updated, accurate motor vehicle logbook you are taking a fundamental step in maximising your deductions at tax time.

 

If you’re unsure about any aspect of using the logbook method for your motor vehicle tax deductions, please reach out to a member of the Sciacca’s team. 
  
 

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