Published : 16 June 2017
As a busy business owner, probably wearing multiple hats, the last thing on your mind is filling in your car log! However, there are some very good reasons for trying to make the time.
In the past, there were a few different ways of working out, and claiming, your business car expenses. But all that has changed. There are now only two ways to do this important task.
There is either the log book method, or the 'cents per kilometre' method, with the rules having changed a little on the latter.
Claim A Bigger Refund
Under the revised method, you can claim a maximum of 5,000 business kilometres per car. You don't need written evidence but you do need to be able to show how you worked out your business kilometres.
An easier method is to keep a log book. This is a great way of tracking your vehicle expenses, and having written proof on hand, should you ever be audited.
If you are a business owner, and you use your vehicle regularly for work, you will probably also get a bigger tax refund using the log book method.
The hardest part of this method is getting started! At first, it seems like a real chore, remembering to check the odometer reading and write it down.
The good news is, you only need to keep a record for a consecutive 12-week period, so long as it is typical of your normal usage.
You basically need to record the following:
- The date, start and finish times for each journey
- The start and finish odometer readings
- The total kilometres travelled on that journey
- The reason for the journey
You will also need to record:
- The start and finish dates for the logbook period
- The start and finish odometer readings for that period
- The total number of kilometres travelled during that period
- And the business use percentage during that period.
Once you have all that information, you work out the amount you can claim. This is actually easier than it sounds!
First, you simply divide the distance travelled for business, by the total number of kilometres. Then multiple that figure by 100. This gives you your percentage.
Next, work out your total vehicle expenses for the income year, including depreciation.
Finally, multiple your total expenses by your percentage to see how much you can claim. (You will need to keep written evidence of things like fuel and oil costs).
Here's an example: During the income year, you travel 11,000km, and 6,600 of those were for business. So you divide 6,600 by 11,000 to get 0.6. Then multiple that by 100, which gives you 60. So your business use percentage is 60%.
Peace Of Mind
Let's say your total vehicle expenses for the income year were $9000. Multiple 9000 by 60%, and your claimable amount is $5400.
You see, it's definitely not as tiresome as it sounds! And not only will you probably get a bigger refund, but there's more good news. Using this method, you only need to fill out a new logbook - for another 12-week period - every five years.
You will also have greater peace of mind. Remember, if you are audited and can't prove your business use, you could face substantial fines.
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