We’re not going to lie, logbooks are a pain. They are an old fashioned way of proving to the tax office how often you use your car for business purposes.
For better or worse, it’s the system we have, so you might as well get your head around using one correctly – it will pay dividends at tax time!
Why do I care? 3 reasons…
1. Keeping a proper logbook means you can claim the maximum amount of car expenses as deductions.
2. As a ride-share or taxi driver – your car will most likely be your biggest tax deduction.
3. Once you have completed a logbook – you can keep it for 5 years!
You will want to have kept a logbook by the time your first BAS is due.
Note: Your ride-share app records are not enough to meet the ATO requirements of a logbook. The ATO requires you to record your odometer readings at the beginning and end of each for each trip or session. So you’ll still need to keep a separate logbook for 12 weeks.
What’s the point of a log book?
The point is to determine the percentage that your car is used for business purposes. This is called the business-use percentage.
This percentage is important because it will determine determine the percentage of GST on car expenses you can claim back from the ATO each quarter.
It will also determine how much of your car expenses you can claim as a deduction on your tax return.
A quick example:
Your expenses for the year are:
Fuel = $700
Servicing = $1,200
Car Washes = $250
Car Insurance = $1,000
If your business-use percentage of your car works out to be 80% (you’re using your car 80% of the time for ride-sharing), you would be able to claim ($3,150 x 80%)
=$2,520 in car expenses in your tax return
And you would also claim back 80% of the GST on car expenses each quarter on your BAS.
How do I keep a logbook?
You need to log each business journey for a continuous 12-week period which is representative of your annual business kilometres travelled.
Record the odometer reading in your car on the first day of the 12-week period.
Each day, record every business journey during the 12-weeks showing the odometer reading when you start your ride-share work and the odometer reading when you finish your ride-sharing work.
Record the odometer reading in your car on the last day of the 12-week period.
Congratulations! You can now determine your business-use percentage and keep it for the next five years.
How do I calculate business-use percentage?
A quick example:
10,000km driven during 12 week period
8,000 km for ride-sharing
= 8,000/10,000 x 100
= 80% business use
Meaning, you would be able to claim 80% of your car expenses as a tax deduction and claim back 80% of the GST you pay on car related purchases.
How do I get a logbook?
You can buy one from stationary stores, newsagents or even make your own. There are even free apps in the Apple and Google app stores that you can download for your phone.