The topic discussed here is the use of the One Third of Actual Expenses Method, which is one of four methods allowed by the Australian Taxation Office for calculating and claiming motor vehicle deductions. To view the list of vehicle deductions available, please visit the ATO website at http://www.ato.gov.au/individuals/content.aspx?doc=/content/00313836.htm&pc=001/002/076/001/002&mnu=0&mfp=&st=&cy=
Out of the 4 available methods, the Logbook method can sometimes be the most effective claim for individuals and businesses, as there is a potential to claim all expenses related to maintaining a car, including interest charges for financed cars, and decline in value (depreciation) or lease payments if leased. The total expenses that can be claimed under the logbook method can be quite considerable. It is also the most demanding of the 4 methods as you are required to, as the name suggests, maintain a logbook, and have written evidence of your expenses.
Your claim is based on the business use percentage of the expenses for the car. To work out your business use percentage, you need a logbook and the odometer readings for the logbook period.
Your business use percentage is the percentage of kilometres you travelled in the car for work during the year divided by the total kilometres travelled by the car during the year.
If the pattern of your car use changed during the year, make a reasonable estimate of your business use percentage for the whole of 2012-13, taking into account your logbook, odometer and other records, any variations in the pattern of use of your car and any changes in the number of cars you used in the course of earning your income.
Your logbook is valid for five years. If this is the first year you are using this method, you must have kept a logbook during 2012-13. It must cover at least 12 continuous weeks. If you started using your car for work-related purposes less than 12 weeks before the end of the year, you can extend the 12-week period into 2013-14. (If you are using the logbook method for two or more cars, the logbook for each car must cover the same period.)
If you established your business use percentage using a logbook from an earlier year, you need to keep that logbook and maintain odometer records. You also need to keep a logbook if we told you in writing to keep one.
Your logbook must show:
- when the logbook period starts and ends, and the odometer readings at these times
- the total number of kilometres the car travelled during the logbook period
- the number of kilometres travelled for work during the logbook period based on the journeys recorded for the period
- the business use percentage for the period.
Entries in the logbook for each business trip must be made at the end of the journey (or as soon as possible afterwards) and show the:
- date the journey began and ended
- odometer readings at the start and end of the journey
- kilometres travelled on the journey
- reason for the journey.
Your records must also show the make, model, engine capacity and registration number of the car.
Calculating your claim
To calculate your claim to Logbook method, apply the following steps:
Work out the total kilometres travelled during the logbook period and how many of these were business kilometres. Divide the business kilometres by the total kilometres travelled. This is your business use percentage.
Add up your total expenses. (See Deductions for decline in value (depreciation) to work out the amount to include for decline in value.)
Multiply the amount at step 2 by your business use percentage from step 1 (or if the pattern of use of the car has changed then use the reasonable estimate you made).
Write the amount at A item D1. Print the code letter B in the CLAIM TYPE box beside the amount on your tax return.
- “Car expenses” taxpayersassociation.com.au. Taxpayers Australia INC. Retrieved 12 May 2013.
- “Car and travel expenses 2012″ ato.gov.au. Australian Taxation Office. Retrieved 12 May 2013.
- “D1 – Work related car expenses 2012″ ato.gov.au. Australian Taxation Office. Retrieved 12 May 2013.
- “Luxury Cars and LCT Threshold” ato.gov.au. Australian Taxation Office. Retrieved 12 May 2013.