When claiming work-related car expenses, many people miss maximising their claim due to poor record keeping.
Inadequate records can also cost dearly if you are audited by the Australian Tax Office (ATO).
A vehicle log book is an important piece of tax substantiation for people who use their car for work. Most people will be familiar with the two main instances where a vehicle log book is required:
1. FBT Compliance – Where your employer requires you to maintain a log book for fringe benefit tax (FBT) purposes.
2. Income Tax – Where you are using the log book method to claim a deduction for work-related car expenses in your personal tax return.
The log book method does require receipts and some diligence! To help, you can download our free vehicle log book template.
Business use percentage of the vehicle
The purpose of the vehicle log book is to show the business use percentage of the vehicle.
The business-use percentage broadly is the business kilometres for the year divided by the total kilometres travelled (obtained from odometer records).
All relevant matters should be taken into account though, including log book, odometer and any other records kept, and a variation in the pattern of business use throughout the year due to things like holidays or seasonal factors
As a general rule, the higher the business-use percentage:
- under FBT — the lesser the amount of FBT payable
- under income tax — the greater the deductions that may be claimed for work-related car expenses
What are the requirements for a valid log book?
The requirements for maintaining a log book for income tax and FBT purposes are mostly the same, although there are some small differences.
The main difference is that an FBT log book applies to the relevant FBT year (that is, ending March 31) while an income tax log book applies to an income year (that is, ending June 30).
Things to be mindful of when using a log book include:
- The log book is valid for five years
- After the fifth year, a new log book will need to be kept. A new one can be started at any time (for example, if it no longer reflects the business use).
- The log book must be kept for at least a continuous 12 week period
- That period needs to be representative of your usual travel throughout the year.
- For two or more cars:
- If you use the log book method for income tax for multiple cars, the log book for each car must cover the same period.
- For FBT, one log book must be maintained for each car where multiple cars are provided by an employer.
- The log book must reflect the business use of the vehicle
- This can be tricky where there is home to work travel, travel between workplaces, or if your work is itinerant in nature. This log book template will help.
- You must keep odometer records
- This is crucial for working out the total distance travelled during the year, and also for the relevant period that the log book is kept. Generally, most odometer records will be kept as part of the log book, showing the starting and closing odometer records for the period.
What information must be kept in your log book?
Each log book must contain:
- When the log book period begins and ends
- The car’s odometer readings at the start and end of the log book period
- The odometer readings at the start and end of each income year that you use the log book method for
- The total number of kilometres the car travelled during the period
- Details for each journey (if two or more journeys are made in a row on the same day, this can be recorded as a single journey) showing:
- Date journey started and finished
- Odometer readings at the start and end of the journey
- Kilometres travelled
- Reason for the journey. Note, in the Tax Office’s view, an entry stating “business” or “miscellaneous business” will not be enough. The entry should sufficiently describe the purpose of the journey. Private travel is not required to be shown, but it may help to include in the records to help with calculations.
Get a log book
You can buy pre-printed vehicle log books from stationery suppliers, create your own, or use this template we have created for you.
There’s an app
The ATO’s app may help with your record keeping. It allows you to capture receipts for work-related car expenses as well as enter information for a log book.
Get more information and download the app here: myDeductions
Although the tool is appropriate for people wishing to claim work-related car expenses, the ATO has not indicated whether it is appropriate for FBT purposes. There are other third party apps that may satisfy the requirements under FBT law but you should satisfy yourself that any app you choose fulfils the requirements under the tax law (check with us if you’re not sure).
Find more information and examples on the links below.
Contact us to make sure you have your vehicle log book in order.
(This article was originally published 28 June, 2016; edited 29 March, 2018)