The Logbook Method
The Logbook Method: What It Is and Why It Matters
The logbook method is a way to calculate the business-use percentage of your vehicle expenses for tax deduction purposes in Australia.
This method is suitable if you use your vehicle for both personal and business purposes and want to claim a higher deduction. Here’s how it works:
- Keep a Logbook: Record your car trips for a continuous 12-week period. Your logbook should detail the date, start and end odometer readings, the purpose of each trip, and whether it’s for business or personal use. This logbook remains valid for five years unless your driving habits change significantly.
- Calculate Business Use: Once the logbook period is complete, you determine the percentage of business use based on the total kilometres travelled. For example, if 75% of your recorded trips were for business, you can claim 75% of your vehicle expenses as a deduction (e.g., client meetings, picking up supplies).
- Keep Receipts: You need to keep records of all vehicle-related expenses, such as fuel, servicing, insurance, registration, and depreciation. The business-use percentage calculated using your logbook is then applied to these expenses.
- Claim Your Deductions: At tax time, apply the business-use percentage to your total car expenses to claim the appropriate deduction.
Why It’s Important
Maintaining a logbook ensures that you maximise your eligible deductions while staying compliant with ATO regulations. It’s particularly beneficial for small business owners, freelancers, and tradespeople who use their cars for business.
By accurately tracking business trips, fuel expenses, and maintenance costs, you avoid leaving potential deductions on the table and reduce the risk of penalties due to incorrect claims.
Benefits of Keeping a Logbook:
- Maximises Deductions: Claim a higher portion of your car expenses based on actual business use.
- ATO Compliance: Provides the necessary evidence in case of an ATO audit.
- Long-term Use: Your logbook remains valid for up to five years.
- Clear Records: Simplifies your tax return process by keeping well-documented travel records.
The logbook method can be more comprehensive and allow higher deductions than the cents-per-kilometre method, but it does require more detailed record-keeping.
Make sure your logbook is complete and accurate. If you’re unsure about how to set up and maintain a logbook or need help with your tax returns, we’re here to assist.
Book a consultation today to learn more about optimising your car expense claims here
