Do you use your car for job-related duties or to run your business? If you do, you should be keeping a comprehensive record of your car-related overheads to ensure you optimise your tax claim. A valid car logbook will also save you time and money during a tax audit.
Here we explore how to claim your motor vehicle expenses as a deduction.
What trips are considered valid
The first thing you need to establish is what trips are considered work-related. You cannot claim a deduction for the cost of normal trips between your home and your regular place of business as these are considered private in nature and you have not commenced work yet.
However, if you work at multiple sites and travel between these places,, you can claim the trip from one site to another as work-related. It is valid as it’s a vital part of your job to travel.
Requirement for the actual costs’ method
Now that we have established what trips are valid, let’s explore the two methods in claiming a motor vehicle deduction. The first method is the cents per kilometre approach which allows you to claim 72 cents per each work-related kilometre you travelled up to the cap of 5,000 kilometres in a year.
The second method is the motor vehicle logbook where you decide the work-related percentage you have used your vehicle and can claim a range of expenses relating to your motor vehicle, including:
- Motor vehicle’s depreciation
- All running costs including fuel, oil, and servicing
- Registration, and
For example, once we have established that you used 50% of your motor vehicle towards work, we can claim half of your fuel expenses as a tax deduction for the financial year.
How to create a motor vehicle logbook
There are different ways to create your logbook – it can be in the form of excel, paper, diary, and account book and these are all accepted by the ATO. But what’s more important than the format is your recordkeeping. A logbook needs to record all your motor vehicle use for 12 consecutive weeks. The logbook must include the following key details:
- Date of each journey
- Start and finish time
- Start and finish odometer
- Total kilometres of each journey
- Reason for each journey. Is it work related or personal?
- Start and finish odometer for the 12-week period, and
- Total number of kilometres for the period.
At William Buck, we have created a simple excel worksheet that shows all the information you need to fill out and will automatically determine your business use. But there are other formats available online that you could use depending on your preference.
Recording your trips is simple and can help you claim a higher tax refund at the end of the financial year. We recommend you follow these best practices to ensure a smooth process of claiming your deductions:
- Always keep a copy of receipts – it is best to take a photo of these receipts to avoid the risk of paper fading.
- Ensure you keep a copy of all bills paid related to your car, and
- Give all your documents and receipts to your accountants at the end of the financial year.
Although it may look challenging at first, the motor vehicle logbook is a straightforward number crunching and cost-effective way to claim your tax deductions but takes commitment as you need to register all the details of each drive you make. Remember, the higher your work-use percentage is, the greater the deductions you will be able to claim.
Contact your local William Buck Health Specialist to learn more about the advantages of creating a motor vehicle logbook.