When claiming work-related car expenses, many people miss maximising their claim due to poor record keeping. If you are audited by the Australian Tax Office (ATO), inadequate records could cost you dearly.

A vehicle log book is an important piece of tax substantiation for people who use their car for work. The two main instances where a vehicle log book is required are:

1. FBT Compliance – Where your employer requires you to maintain a log book for fringe benefit tax (FBT) purposes.

2. Income Tax – Where you are using the log book method to claim a deduction for work-related car expenses in your personal tax return.

The log book method does require receipts and some diligence! To help, you can download our free vehicle log book template.

Business use percentage of the vehicle

The purpose of the vehicle log book is to show the business use percentage of the vehicle.

The business-use percentage is, broadly, the business kilometres for the year divided by the total kilometres travelled (obtained from odometer records).

However, all relevant matters should be considered, including log book, odometer, and other records kept, and a variation in the pattern of business use throughout the year due to things like holidays or seasonal factors.

Generally, the higher the business-use percentage:

• under FBT — the lesser the amount of FBT payable
• under income tax — the greater the deductions that can be claimed for work-related car expenses

What are the requirements for a valid log book?

The requirements for maintaining a log book for income tax and FBT purposes are mostly the same, although there are some small differences.

The main difference is that an FBT log book applies to the relevant FBT year (that is, ending March 31) while an income tax log book applies to an income year (that is, ending June 30).

Things to be mindful of when using a log book include:

• The log book is valid for five years
  • You must keep a new log book after the fifth year. You can start a new one at any time (for example, if it no longer reflects the business use).
• You must record for at least a continuous 12-week period
  • That period needs to be representative of your usual travel throughout the year.
• For two or more cars:
  • If you use the log book method for income tax for multiple cars, the log book for each car must cover the same period.
  • For FBT, where multiple cars are provided by an employer you must maintain one log book for each car.
• The log book must reflect the business use of the vehicle
  • This can be tricky where there is home to work travel, travel between workplaces, or if your work is itinerant in nature. Our log book template will help.
• You must keep odometer records
  • This is crucial for working out the total distance travelled during the year, and for the relevant period that the log book is kept. Generally, you will keep odometer records as part of the log book, showing the starting and closing odometer records for the period.

What information must be kept in your log book?

Each log book must contain:

• When the log book period begins and ends
• The odometer readings at the start and end of the log book period
• The odometer readings at the start and end of each income or FBT year that you use the log book method for
• The total number of kilometres the car travelled during the period
• Details for each journey (if two or more journeys are made in a row on the same day, this can be recorded as a single journey) showing:
  • Date journey started and finished
  • Odometer readings at the start and end of the journey
  • Kilometres travelled
  • Reason for the journey. Note, in the Tax Office’s view, an entry stating “business” or “miscellaneous business” will not be enough. The entry should sufficiently describe the purpose of the journey. You are not required to show private travel, but it may help with calculations if you include it in your records.

What can you use to keep your records?

1. Manual log book

You can buy pre-printed vehicle log books from stationery suppliers, create your own, or use this handy template .

Download your free vehicle log book

2. Electronic records

The myDeductions tool in the ATO app may help with your record keeping. It allows you to record and manage car trips, expenses, and other deductions. Get more information and download the app here: myDeductions

Note: The tool is most appropriate for people wishing to claim work-related car expenses in their income tax return. The information captured is appropriate for FBT purposes but be aware that the information in myDeductions may pre-fill the deductions in your tax return, so you should check this before lodging!

There are other third party apps but you should satisfy yourself that any app you choose fulfils the requirements under the relevant tax law. Check with us if you’re not sure.

What next?

Contact us to make sure you have your vehicle log book in order!