Deductions
Logbook method
The logbook method calculates the business share of car costs from a logbook kept over at least 12 continuous weeks, then applies that percentage to the car's actual running costs.
The logbook method is a way of claiming car expenses based on the proportion of the car's use that is for business or work. You keep a logbook recording your trips over a continuous period of at least 12 weeks. From that sample you work out a business use percentage, and you apply that percentage to the total actual costs of running the car for the year.
A valid logbook records each journey, including the date, the start and finish odometer readings, the kilometres travelled and the purpose of the trip. You also record the odometer readings at the start and end of the logbook period and at the start and end of the income year. The log has to reflect the usual pattern of use, so choosing 12 weeks that are unusually busy for business is not appropriate.
Once a logbook is complete, it can generally be used for five years, as long as your travel pattern stays broadly similar. If your use changes significantly, for example you change jobs, move or buy a different car, you should start a new logbook. A logbook is specific to a car, so each car needs its own.
The costs you apply the percentage to include fuel, oil, registration, insurance, repairs, servicing, lease payments or interest, and the decline in value of the car. For these you need written evidence such as receipts and invoices, because the method relies on actual cost records. This is the main difference from the cents per kilometre method, which does not need the same expense records.
The method works well for people who drive a lot for business or whose car has high running costs, because the deduction follows real costs. It does involve more administration. If you are registered for GST, the business use percentage from your logbook is a sensible basis for apportioning GST credits on car running costs. Credits on the purchase price of the car are limited by the car limit, and credits are claimed in the BAS for the period of the tax invoice.
A frequent mistake is writing the logbook up after the fact from memory, which weakens its reliability. Another is continuing to use an old logbook after your circumstances have changed. Some people also forget that private trips, including commuting, are not business use. This is general information only, and you should confirm your situation with the ATO or a registered tax professional.
Worked example
Mia keeps a logbook for 12 continuous weeks. It shows 4,500 business kilometres out of 6,000 total, which is 75% business use. Her car costs for the year are $9,900 including GST for fuel, insurance, registration and servicing. Her claim is 75% x $9,900 = $7,425 inclusive of GST. The GST credit is $7,425 / 11 = $675, and the GST-exclusive deduction is $6,750.
Practical tips
- Record trips as they happen. A logbook written up from memory is much easier for the ATO to challenge.
- Start a new logbook if your driving pattern changes significantly, rather than relying on an old one past its usefulness.
- Keep receipts and tax invoices for every running cost, as the logbook method relies on actual expense records.