Motor Vehicle Claims and How the Logbook Actually Works

Vehicle claims are among the most commonly made and most commonly adjusted deductions in the system. The rules themselves are stable and well documented. The failures are almost always evidentiary.

Two methods exist for individuals claiming car expenses. One applies a set rate per business kilometre up to a capped number of kilometres, and requires the taxpayer to be able to show how the kilometres were worked out. The other uses a logbook to establish a business-use percentage, which is then applied to actual running costs including depreciation. The ATO publishes the current rate and cap.

What makes a logbook valid

A logbook has to cover a continuous period that is representative of the year’s travel — twelve weeks is the standard period — and for each journey it records the date, the odometer readings at start and end, the kilometres travelled and the purpose of the trip. Odometer readings are also needed at the start and end of the period, and for the year as a whole.

Once established, a logbook can generally be relied on for several years, provided the pattern of use it describes remains representative. If circumstances change materially — a new role, a different work pattern, a different vehicle — the percentage it produced no longer describes reality and a fresh logbook is needed.

Where claims fall over

• Trips recorded with a purpose written as "work" and nothing else, which does not establish the journey was deductible.
• Home-to-work travel included as business use, when it is generally private regardless of distance.
• A logbook kept in a fortnight the taxpayer happened to be unusually busy, producing a percentage that does not represent the year.
• An old logbook applied to a completely changed working pattern.
• No odometer readings, so the total kilometres cannot be tied to anything.

The general position on home-to-work travel is the one most often misunderstood, and it is the same principle that comes up for FIFO and resources workers: ordinary commuting is private, and distance does not change that.

What the logbook percentage is actually applied to

Under the logbook method the percentage is applied to actual running costs, which is a broader list than fuel. It takes in registration, insurance, servicing and repairs, interest where the vehicle is financed, and depreciation of the vehicle itself — subject to the cost limit that applies to cars.

That is why the method rewards record keeping twice over: the logbook establishes the percentage, but the running costs still have to be substantiated to be included. A carefully kept logbook applied to costs nobody recorded produces a smaller claim than the taxpayer expected.

It is also why the two methods are not simply a choice between more and less paperwork. Where work use is genuinely high and the vehicle is expensive to run, the difference between the methods can be substantial.

Businesses and vehicles provided to employees

Where a vehicle is owned by a business, or is provided to an employee for private use, the questions are different again — the deduction sits with the entity, and providing a vehicle for private use can bring fringe benefits tax into play. That is a separate obligation with its own return and its own records, covered under fringe benefits tax.

Businesses frequently discover this the wrong way round: the vehicle costs are claimed, and the FBT consequence of the private use is not considered until later.

The unglamorous conclusion

Almost all of the value in a vehicle claim comes from twelve weeks of consistent, slightly tedious recording, done once every few years. Almost all of the risk comes from not doing it and estimating instead.