One of the most effective ways to increase the amount of money you receive on your tax return is to claim a deduction on your travel expensive. The car logbook method is a common way to track your car expenses.
If you use your car for employment purposes, the Australian Tax Office will allow you to make a claim on your tax return for some of your car related expenses.
In most instances, if you use your car for work on a regular basis, the car logbook method will give you a bigger tax refund than the cents per kilometre method.
The reason why the logbook method is more effective is due to the fact that the logbook enables you to claim a percentage of all of your car expenses. These expenses include; fuel, maintenance, registration, interest on loans etc.
The alternative method for claiming car expenses via the cents per kilometre method only enables you to claim a set rate for fuel only. This means you are likely to miss out on claiming all other car related expenses.
The purpose of the logbook method is to record every trip in your vehicle (both for business and private) over a 12-week period. Your logbook is then used to calculate the “business use percentage” of your car.
Your business use percentage is determined by the percentage of kilometres you travel in your car for business related purposes. It’s also the percentage of all your car expenses you paid during the year that you can claim on your tax return.
When you record your driving history with a car logbook, it makes it easy to calculate your business use percentage and makes it easy for you to provide the evidence required by the Australian Tax Office in order to gain access to your deduction.
It is crucial for you to record every trip you make in your car for 12 weeks, this is not just work trips. If you fail to record every trip, the Australian Tax Office will deem your logbook as invalid and could potentially reject all of your car expense claims.
Although it takes a fair amount of patience to get going, you will only need to do a logbook once every 5 years. As long as your driving habits remain consistent each year you can use that logbook on for five years’ worth of tax returns.
Because you only have to do a logbook every five years, this makes the car logbook method very convenient to use. Even if you get a new car during the five-year period, you are still allowed to continue using the old logbook as long as your work-related used hasn’t changed either up or down.
Things You Can’t Claim
Generally speaking, you are unable to claim the cost of travel between home and work because this travel is defined as private.
You are always unable to claim a deduction for a car expense that has been salary scarified or where you have been reimbursed for these expenses.
If you are driving a motorcycle or any other vehicle that is not a car, you are unable to claim work-related deductions under car expenses. However, you might be able to claim for work-related deductions under travel expenses. You can only claim your actual expenses for these vehicles. To claim these expenses, you must use the logbook method to prove your work-related use.
The team at C&D Restructure and Taxation Advisory are here to help. As part of the Vault Group we can offer the full suite of financial products and advice to help you navigate the business landscape. Schedule a meeting here via Calendly or give us a call on 07 36086800.
The team at C&D Restructure and Taxation Advisory are here to help. As part of the Vault Group we can offer the full suite of financial products and advice to help you navigate the business landscape. Schedule a meeting here via Calendly or give us a call on 1300 1 VAULT (1300 182 858)
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