If you’re a sole trader who spends more of your day behind the wheel than at a desk, you might feel like the cents per kilometre method doesn’t quite cut it. It caps out at 5,000 business kilometres a year – and if you’re driving well past that for work, you could be leaving money on the table.
That’s where the logbook method comes in. Here’s how it works, and how to tell if it’s worth the extra paperwork.
What is the logbook method?
The logbook method lets you claim a percentage of your actual car running costs – the percentage being however much you use the car for business.
Instead of a set rate per kilometre, you work out what share of your driving is work-related, then apply that share to everything it costs you to keep the car on the road. Like the cents per kilometre method, it’s only for vehicles the ATO classes as “cars.” (Utes over 1 tonne, vans, motorbikes and the like have to use the actual costs method instead.)
But, the catch is right there in the name: you need a logbook to back it all up.
What you need to record in your logbook
Your logbook has to cover at least 12 continuous weeks, and those weeks need to reflect how you typically use the car across the year. What the ATO is after is a representative stretch of your driving.
For every trip in that period, jot down:
- The date, plus where you went and why
- Your odometer reading at the start and end of the trip
- The kilometres you travelled
You’ll also need your odometer readings for the very start and end of the whole logbook period, so your total distance is on record. Even if you use the car for work 100% of the time, you still need the logbook to prove it to the ATO.
If twelve weeks of trip notes sounds like a lot of admin, good news: we built Mileage by Hnry to solve this exact problem. Mileage tracks your trips automatically in the background, so your logbook more or less keeps itself. It’s free for Hnry users.
Working out your claim
Once your logbook’s done, the maths is refreshingly straightforward:
- Work out your business-use percentage: business kilometres ÷ total kilometres × 100
- Add up your total car running costs for the year
- Multiply the two together, and that’s what you may be able to claim
What you can (and can’t) include
The running costs you may be able to claim include:
- Fuel and oil
- Registration and insurance
- Servicing, repairs and tyres
- Lease payments, or interest on a car loan
- Depreciation on the car’s value
Depreciation’s the one people tend to forget – you may be able to claim the drop in your car’s value over time, again scaled to your business-use percentage. There are limits and thresholds on how that works, and they change from year to year, so it’s worth checking the current rules or letting someone handle it for you.
A few things you can’t claim, no matter how work-related the trip felt: fines, parking tickets and towing fees. The ATO won’t budge on those. Sorry!
Let Hnry take care of the rest
Sorting your vehicle expenses can be a bit of a faff. That’s where Hnry comes in.
For 1% of your self-employed income +GST (capped at $1,500 +GST a year), Hnry looks after the financial admin that comes with working for yourself. Whenever you get paid, we automatically calculate and pay your:
- Income tax
- GST (if you’re registered)
- Medicare levy
- Student loan repayments
- Super contributions (if you choose to make them)
We’ll even lodge your BAS and tax returns, whenever they’re due – and with Mileage by Hnry built in, your vehicle expenses are tracked and ready to go, no shoebox of receipts required.
Join Hnry today.
DISCLAIMER: The information on our website is for general educational purposes only. It doesn’t cover all situations and circumstances, and shouldn’t be taken as direct tax advice. If you’re looking for specific help with your taxes, join Hnry and our team of experts can provide you with assistance tailored to your business needs.