Are you familiar with the ATO’s cents per KM method? In 2023-2024, you can be reimbursed by the Australian Tax Office for $3,000 or more, based on your car expense deductions. $10,000, and more, is available to some people. A considerably attractive sum, don’t you think? It’s money you could spend on a holiday this year, car accessories or to help smooth out cash flow gaps in your budget. Today we’ll show you how to make the most of the ATO cents per KM method. We’ll also explore a few additional ideas on how to maximise your tax return. You’ll have an action plan on how to get more money back on your taxes. Get off to a flying start on a lifetime of being smarter with your annual tax refund. What You’ll Learn Toggle Your Quick GuideATO Cents Per KM vs. the Logbook Method: Which One is Right for You?How Do I Claim My Car Expenses Using the ATO Cents Per KM Method?Which Trips Qualify for a Tax Return?Use a Logbook App to Get More Money Back on Your TaxesDownload GOFAR Logbook App to Maximise Cents per KM Your Quick Guide The below table summarises factors to compare which method suits your driving and business needs best. Factors Cents per KM Log book Frequency of business-related travel with your vehicle ✖ ✔ High fuel and running costs of your vehicle ✖ ✔ Difficulty in retaining receipts, get GOFAR app ✔ ✖ Rapid depreciation of a new vehicle ✖ ✔ Fuel efficiency and low running costs of your vehicle ✔ ✖ Annual work-related travel below 5,000km ✔ ✖ Preference for documentation simplicity ✔ (Simpler) ✖ (Detailed) Consistent business use of your vehicle ✖ (Best for sporadic use) ✔ (Best for consistent use) Limitations on claimable amount based on distance ✔ (Capped) ✖ (No cap) Duration constraints for valid claims ✔ (No specific duration) ✖ (12 weeks minimum, valid for 5 years) Time and effort for maintaining records ✔ (Minimal) ✖ (Time-consuming) Need for a detailed audit trail for tax verification ✖ ✔ ATO Cents Per KM vs. the Logbook Method: Which One is Right for You? If you’re using your own car for business purposes, you can take advantage of a better tax return from the ATO. Expenses incurred while driving your car for work, can be claimed as a business expense, and are therefore eligible for reimbursement from the tax office. You can only claim a deduction if you’re using your own car: To earn income as a sole-trader (e.g. tradies, ride-sharing professionals). To undertake business trips as an employee in a company. Now, to determine the percentage of your personal and business trips, you need to keep business mileage records. To do this, you can choose between two methods. We’ll do our best to present their pros and cons so you can work out which one best suits your needs. To make it even easier, check out the GOFAR app. I’m a happy customer, it allows me to easily track my KMs and separate personal from business. Kieran Danes, Verified Customer, Jan 2021 Method 1: ATO Cents Per Kilometre Method Perhaps you’re wondering how many kilometres you can claim without a logbook? Or what your maximum claim would be if you used the cents per kilometre method? Well, we’re about to answer these and other questions that might be bugging you. Ready to look at the pros and cons of the cents per kilometre method? Let’s dive right in. Pros: No requirement to keep a detailed logbook No need to keep receipts for your car expenses It’s easier to calculate the deduction at the end of each financial year All you need to do is keep diary records of your work-related trips Cons: You can only claim a maximum of 5,000 business kilometres annually Your claim is limited to a set rate, which is 85 cents per kilometre for the 2023-2024 income year You can’t claim separate deductions for insurance premiums and depreciation Method 2: Logbook Method The vehicle logbook method is a more complicated process. But if you were wondering how to get $10K back from your taxes, keep on reading. To get closer to that figure though, you’ll need to have some serious business mileage and learn some logbook keeping tips and tricks. But now, let’s focus on the pros and cons! Pros: You can claim your actual expenses, meaning everything will be included from kilometres driven to insurance and depreciation It can get you a potentially bigger tax benefit You’re allowed to claim car depreciation as well You only need to reassess your logbook average every 5 years Cons: You need to keep a valid logbook for at least 12 weeks, so the record-keeping is more time-consuming You need to know the rules so you know which trips qualify as business mileage You need to keep receipts of all your car expenses throughout the year, and have these available to the tax office Sample Logbook Template Download a sample logbook template of an approved ATO-compliant logbook for your vehicle to learn which details are needed for each record. Or use the GOFAR app instead. What Type of Vehicle You Drive Matters This is where you’ll want to figure out which method gives you the largest tax return. Think of it this way: it depends on your current vehicle (approved by ATO) and work situation. If your work schedule is hectic round-the-clock, or you’re a forgetful person, then the logbook method isn’t the best idea. You simply won’t be able to squeeze in the required time. Here are a few more factors to take into account: If you have a low-maintenance car, the cents per kilometre method will be a better fit for your needs. It’s easier to manage the day-to-day requirements, and you won’t have much use for the logbook method as your car running costs aren’t as steep. If you have a high-maintenance car, needing constant maintenance, the logbook method will allow you to reimburse the majority of these expenses. So, it can be worth the extra time and hassle. The cents per kilometre method is better for people with lower vehicle usage. How Do I Claim My Car Expenses Using the ATO Cents Per KM Method? As mentioned above, the cents per kilometre method allows you to get your money back on your tax return with minimal effort. But you still need to offer proof to the ATO of how you worked out your business kilometres. Once you set your sights on a healthy tax refund, trust us, you won’t feel like you’re doing much work at all for your record-keeping. It’s that easy. All you need to record is: The total kilometres you’ve driven over the course of the year The number of kilometres you’ve driven for business The number of kilometres you’ve driven for private purposes Tracking your total kilometres is simple. Just jot down the start and end odometer readings on the day the financial year begins and ends. Now, here’s how to calculate your tax deduction using the cents per kilometre method. Simply multiply your business kilometres by the amount per kilometre allotted by the ATO. We’ll translate this into numbers. Let’s say you cover the maximum of 5,000 kilometres for the 2023-2024 financial year. This is your calculation: 5,000 kilometres x $0.85 = $4,250. This is how much you’d be able to claim at tax time. It’s worth it! Down to the last penny. Bonus Tip: If the cents per kilometre is your preferred method, keep in mind that you should opt for it in the first year you use your car for business. After that, you’re free to pick the cents per kilometre again or switch to the logbook method. How Can You Claim $10,000+ in Deductions? Let’s break it down in a table that shows the average kilometres that people drive for business each year and therefore the reimbursement that they’re eligible to receive in the 2023-2024 financial year. Distance Covered (Annual) ATO Reimbursement Rate for 2023-2024 Total Reimbursement Claim Typical Drivers 5,000 kilometres $0.85 per kilometre $4,250 Part-time Sales Reps, Local Real Estate Agents, Consultants 7,500 kilometres $6,375 Local Delivery Drivers, Home Health Care Professionals, Local Journalists 10,000 kilometres $8,500 Regional Sales Reps, Field Technicians, Rural Real Estate Agents 15,000 kilometres $12,750 Regional Managers, Traveling Trainers, Construction Supervisors 20,000 kilometres $17,000 National Sales Reps, Truck Drivers, Consultants with National Clients Which Trips Qualify for a Tax Return? If you are going to track your kilometres in order to receive a reimbursement, you need to learn how to separate the wheat from the chaff. In other words, your business kilometres from personal trips. You need to be clear on what you can and what you can’t claim as a deduction. That is to say, which trips the ATO considers business-related and which it doesn’t. Kilometres that count as work-related are those conducted solely for business purposes. For example, kilometres driven: To meet a client, visit a customer, or attend a conference. To attend a meeting with your accountant or lawyer. To visit the bank, or pick up work supplies (e.g. visiting stationery or a computer store). To travel between alternative offices. In more detail, expenses you can claim, according to the ATO include: Fuel and Oil Costs: You can claim the cost of fuel and oil if you have records to show your work-related use of the car. Repairs and Servicing: If you use your car for work purposes, you can claim a deduction for repairs and servicing. Insurance Premiums: Premiums paid for insuring your car can be claimed if the car is used for work purposes. Depreciation: If you own the car and use it for work, you can claim a deduction for its decline in value. Lease Payments: If you lease a car and use it for work, you can claim the lease payments. Interest on Car Loans: If you’ve taken out a loan to purchase a car for work purposes, you can claim the interest on the loan. Registration: The cost of registering your car can also be claimed if it’s used for work. Parking Fees and Tolls: If you incur parking fees or tolls while using your car for work, these can be claimed as deductions. But, not parking fines, unfortunately. Below are the types of driving/kilometres you CANNOT claim as work-related: Driving between home and work (except in limited circumstances where you’re required to transport bulky tools or equipment). Any trip to the post office or shop when you’re heading back home from a business-related trip. You can’t claim a deduction for any remaining kilometres from the post office or store to your home. Want to learn more about what makes your business claim legitimate or invalid? Read: Understanding ATO Motor Vehicle Rules Use a Logbook App to Get More Money Back on Your Taxes An ATO logbook app is the easiest, most convenient and accurate tracking option available for Australian taxpayers. It’s the shortcut to getting your hard-earned money back into your pocket. Finding a proven way of keeping meticulous business driving records, and you’ll be well on your way to a neatly filed tax return. That’s exactly what a logbook app does. A logbook app such as GOFAR will track all the information you need to record under the cents per kilometre method. It’ll capture your total mileage and take snapshots of your odometer readings as you drive. All you need to do is classify your trips as business or personal. Hand on your heart, can it get any easier? Only 2 days in but this is great. Sure gonna make tax time easier. It’s actually pretty entertaining seeing how well you can drive too. Loses 1 star for just general info about all the stats not being very clear for non car persons. But really cool. Thanks. Susan Yuill, Verified Customer, Mar 2021 Hear Louise Chilton’s story on how she saved time and money using the GOFAR logbook app. Download GOFAR Logbook App to Maximise Cents per KM People often opt for the cents per KM method because they feel they don’t have enough time, or simply can’t remember to record their drive every trip. For such people, wasting time on keeping extensive records is not an option. But what would you say if we told you that you can even save more of your valuable time? Enter GOFAR. The GOFAR app will automate your logbook tracking and keep detailed records of business and personal kilometres driven. GET THE APP GOFAR enables you to: Log, compute and export business expenses at the press of a button. Never miss a trip, thanks to its set-and-forget device that logs every trip. Categorise business trips in seconds. Keep ATO records on both iPhone and Android. Learn more about how GOFAR can jump in and save you time. Or get GOFAR today to maximise your tax return in 2023-2024 and save hours on your kilometre logging. Learn the Terminology Cents Per Kilometre Method: This is a method used for calculating car expense deductions for tax purposes. Under this method, individuals can claim a set rate (determined by the ATO) for each business kilometre travelled, up to a maximum limit of kilometres per year. It does not require detailed records of all car expenses, but individuals must be able to demonstrate how they determined their business kilometres. Logbook Method: This is another method used for calculating car expense deductions for tax purposes. With the logbook method, individuals maintain a detailed logbook over a continuous 12-week period, recording all business-related car journeys. This logbook is then used to determine the percentage of total car expenses that can be claimed as a deduction. The logbook contains information such as the date, purpose, and distance of each trip. Once established, the logbook is valid for five years, but all car expenses and odometer readings must be recorded during this period. Editor’s Note: This article was last updated on Thursday 21st March 2024 with the latest kilometre rates and claim details from the Australian Taxation Office.