- 14 March 2021
- Posted by: runningthenumbers
- Categories: Accounting, Employer, Fringe Benefits Tax
Whether you lease your vehicle, have a loan for it or own it, if you are using your vehicle for work or in your business you will want to claim these costs at tax time!
Yes the ATO will allow you to claim expenses without a logbook if you are an individual but these are limited. If you use your car a lot for work, either as a business owner or employee keeping a logbook can really boost your deduction.
The ATO allow you to claim vehicle use in one of two ways:
- A set rate per kilometre (capped at 5000 km of business use); or
- A percentage of actual motor vehicle costs based on the business use percentage of the motor vehicle. These costs include all vehicle expenses such as fuel, registration and insurance, maintenance, interest on loans and depreciation on the vehicle itself. To use this method you do need to track your vehicles usage for a minimum of 12 weeks.
What if my company or Trust owns the Motor Vehicle?
If the vehicle is owned a by a company or trust, it may be subject to Fringe Benefits Tax on any personal use of the motor vehicle. There are two methods for calculating Fringe Benefits Tax briefly discussed below:
- Statutory method – if you haven’t kept a logbook, this is the easi8est method to use as it is calculated at a set % of the vehicles cost;
- Operating cost method – this method is definitely preferred if you have a high business use percentage of the vehicle as any benefit is calculated on the actual use and costs incurred.
We will where possible, calculate the FBT using both methods and use the one that benefits you the most. To do this however, a logbook must be kept and we must be able to attribute which costs belong to which vehicle.
What you need to know about keeping a Motor Vehicle Logbook
Your logbook should cover at least a 12 week period and this 12-week logbook will be valid for five years. How easy is that! You only have to do it once every five years!
These are the specific details that you should include in your logbook in determining the percentage of work/business usage. Note that all trips should be recorded and not just work related trips.
- date for each journey
- start and finish times for each journey
- start and finish odometer readings for each journey
- total number of kilometres for each journey
- reason for each journey
- start and finish dates for the logbook period
- start and finish odometer readings for the logbook period
- total number of kilometres travelled during the period
- business use percentage for the period
In calculating your work/business use percentage, you just have to divide your work/business use kilometres by the total kilometres that you obtained from the 12 week period and lastly, multiply what you got by 100.
Here’s an example:
You travelled a total of 3,000 kilometres for the 12 week period. 1,200 of these are work/business related.
1,200 ÷ 3,000 × 100 = 40%
From here, you can claim 40% of all your vehicle expenses for the financial year.
As convenient as it gets, even if you purchase a new car during the 5-year period, you can continue using the same logbook as long as your work-related usage has not changed significantly.
In the instance that you have two or more cars, it is advised to keep a logbook for each vehicle and these should cover the same period.
Now we know how much we can claim. Your next question might be, “What specific vehicle expenses can I claim?” Glad you asked!
Generally, expenses include all running costs and the decline in value of the vehicle. Specifically:
- Fuel and Oil
- Servicing, repairs and maintenance
- Registration and Insurance
- Depreciation of the vehicle
- Interest on any borrowings to purchase the vehicle
On the other hand, these costs do not qualify:
- Purchase cost of your car (although currently this is allowed for businesses. Employees can claim a % of the purchase amount each year)
- The principal repayments of any loan amounts
- Any improvement costs (these will also be depreciated or may be deductible if you have a business)
- Parking tickets, Speeding and other fines
Important things to keep in mind
Remember that it is not just the logbook that should be kept to make a claim. It is necessary to keep written evidence such as receipts of all vehicle expenses to prove your claims. This way you can take advantage of maximising your deduction with peace of mind that you have everything in place.
Where can you get a log book?
You can buy an ATO compliant logbook from any newsagent or you can download our free template here.
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