As a business owner, you can claim a tax deduction for expenses for motor vehicles – cars and certain other vehicles – used in running your business.
When it comes to claiming on motor vehicle expenses, sole traders and those operating in partnerships are able to claim for the cars used for their business with the logbook method.
It’s a fairly simple method for claiming the tax deductions on the expenses that can be incurred with vehicles. However, it does require rigorous record-keeping of those expenses. The expenses that you can claim on your vehicle used for business purposes can include:
- fuel and oil
- repairs and servicing
- interest on a motor vehicle loan
- lease payments
- insurance cover premiums
- depreciation (decline in value).
Working Out The Amount You Can Claim With The Logbook Method
A registered tax agent can assist you with the process of making a claim on your vehicle, but they need to be sure that you are accurately recording the expenses. To work out the amount that you can claim with the logbook method, you need to:
- Keep a logbook
- Work out your business-use percentage (divide the distance travelled for business by the total distance travelled, then multiply by 100)
- Add up your total car expenses for the income year
- Multiply your total car expenses by your business-use percentage
You need to be able to provide the Australian Tax Office with evidence of your expenses that have been claimed. You will need to keep records of:
- An electronic or pre-printed logbook
- Evidence of your actual fuel and oil costs, or odometer readings on which you estimate your fuel and oil use
- Evidence of all other car expenses
The logbook is perhaps the most important and critical component of this claims method. It needs to contain:
- when the logbook period begins and ends
- the car’s odometer readings at the start and end of the logbook period
- the total number of kilometres the car travelled during the logbook period
- the number of kilometres travelled for each journey. If you make two or more journeys in a row on the same day, you can record them as a single journey
- the odometer readings at the start and end of each subsequent income year your logbook is valid for
- the business-use percentage for the logbook period
- the make, model, engine capacity and registration number of the car.
Was this year going to be the first year that you kept a logbook to use for this method? It needs to be kept for at least 12 continuous weeks during the income year, and be indicative and representative of your travel throughout the year.
If you are planning to use the logbook method to claim expenses for two or more vehicles, the logbook for each one must cover the same timeframe. The 12-week period that you choose should be representative of the business use of all vehicles. This is to ensure that you don’t change your pattern of driving to suit the log books.
As always, you need to keep in mind that business and personal use needs to be correctly identified and distinct in the percentage that you are claiming for work purposes. Travelling between your home and your place of business is considered to be for private use unless you are a home-based business and your trip was for business purposes.