May 24, 2019 Emily Kermac

Claiming Car Expenses: Cents Per Km or Logbook Method?

Emily Kermac

Emily Kermac

Partner
Emily Kermac is adept at small business structures, restructures and champions the growth of our clients. Her efforts are focussed on the optimal tax outcomes via trusts and SMSF’s.

From 1 July 2015, the ATO reduced your options for claiming car expenses down to two methods:

  • cents per kilometre method
  • logbook method

Both methods have benefits and cons, and which method is right for you will depend on your circumstances.

 

Cents per km method

The cents per kilometre method is easier for record keeping, involves more simple calculation, and is generally suited to those with less vehicle use.

You simply keep a record of the number of kilometres you’re traveling for work or for business over the duration of the year and you claim these using a set rate.

Currently for the 2019 financial year, that rate is 68 cents per kilometre.

The negative of this method is that you are limited to a maximum of 5000 work related or business kilometres per year. That gives you a total maximum claim of $3,400. If you’re using your car a lot for work, you may find that this is quite limiting.

 

Cents Per Km Method
Pros Cons
Simple calculation and record keeping Total claim limited to 5000kms, or $3400
No need to keep all receipts for running expenses No separate claim for depreciation of car
Generally suited to people with lower business vehicle use  

 

Logbook method

The logbook method can allow for greater claims depending on how much you’re using your car for work or business.

However, there are more recordkeeping requirements – the main one being that you must keep a 12 week logbook that records all of your trips, both business and private for that 12 weeks.

At the end of the 12 weeks, you calculate your work related or business percentage use, and you can claim that percentage of all deductions for your car.

You also need to keep all receipts for fuel, insurance, registration, interest, and servicing throughout the year.

As mentioned, despite the additional effort, it can often lead to a greater claim if you are using your car a lot for work and business.

Logbook Method
Pros Cons
Potentially allows for much larger deductions More time consuming record keeping requirements
Ability to claim a percentage of actual expenses as well as depreciation of the vehicle Must keep receipts for all car expenses
Generally suited to people with large amount of business related vehicle use  

 

Which is best for you?

As you can see, both methods do have their differences and can have their benefits depending on your situation.

It’s best to consider which is most realistic for you. Think about:

  • Will you have the time or the ability to save all of your car-related records?
  • Do you have a lot of business related vehicle use?
  • Are you willing to put in potentially more effort for a potentially better return?

If you have any questions, please don’t hesitate to contact us or speak to your current accountant. We can assess your current situation and suggest the best option for you.

Emily Kermac

Emily Kermac

Partner
Emily Kermac is adept at small business structures, restructures and champions the growth of our clients. Her efforts are focussed on the optimal tax outcomes via trusts and SMSF’s.

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