Logbook Method Vs Cents Per KM Method: How to Decide

Credit: Ingo Joseph

What method are you using to track your car expenses?

The Logbook Method or the Cents Per KM Method?

Not sure? New to the chore of tracking mileage for the ATO?

Seasoned drivers will know that if you use your vehicle for business, you probably have high mileage, which means soaring fuel costs, maintenance fees, and other vehicle expenses.

So it makes sense for a savvy professional to deduct your vehicle costs as a business expense.

But keeping records and calculating your car deduction claims can be tedious (and ultimately, expensive) if you’re not using the most efficient tools.

We’ve explored both vehicle expense methods so we can help you find the logbook app that will maximise your tax refund.

The Cents Per KM Method – Claiming < 5,000km

The Cents Per KM Method is based on 68 cents per km for the 2018 – 2019 income year.

You don’t need written evidence to apply this deduction in your income tax return, but the Australian Tax Office (ATO) may require you to justify your business kilometres.

Each driver can claim a maximum of 5,000 business kilometres per year.

The maximum deduction you can claim is therefore limited to (5,000 x $0.68) = $3,400 per driver.

So if you drive more than 5,000km for work each year, or use a gas-guzzling vehicle, the Cents Per KM Method will not give you the deduction you are entitled to.

Besides, you can’t make a separate claim on the depreciation of your vehicle, which is very limiting if you frequently use your vehicle for work.

In this case, the Logbook Method would be the best option to ensure maximum deductions at tax time.

The Logbook Method – Claiming > 5,000km

The Logbook Method is based on your vehicle’s business use percentage, which can result in a higher claim if you drive a lot for work.

The Logbook Method is a little more complex than the Cents Per KM Method, and it requires that you keep meticulous records and car expense receipts.

You must keep a logbook for at least 12 continuous weeks during one income tax year.

Deciding which weeks to select requires some contemplation – picking a slow 12-week period will lower your claim amount. However, an unusually busy season will open you up to scrutiny from the ATO and expose any inconsistencies in your calculations – with not-so-nice results.

So the 12-week window you select must be as ‘typical’ as possible and every trip you make, work-related or not, must be included.

Your logbook must include the following information:

  • The start and end date of your logbook period
  • Exact odometer readings at the beginning and end of the logbook period
  • Total number of kilometres travelled during the logbook period
  • The make and model of your car
  • The registration number and engine capacity of your car

Every work-related trip must show:

  • The start and finish date
  • The start and finish time
  • Accurate odometer readings at the beginning of the business trip
  • The number of kilometres travelled
  • The specific reason for the journey

Remember, driving to and from work is not classified as work-related, and your home is only categorised as a workplace on the condition that you carry out itinerant work. This would qualify you to claim the driving costs between different work sites.

What are the Indicators of Itinerant Work, According to ATO Rules?

  • Your residence is the base of operations for your business
  • Travel is a fundamental part of your work
  • You have shifting places of work throughout the day
  • You regularly travel from one work site to another before returning home
  • You don’t have a long-term plan or regular pattern regarding your workplace location
  • You have to carry heavy equipment from home to different work sites

Sounds like lots of work to document all this information, right?

A logbook app can save you time by automatically tracking data on your smartphone.

You can ditch the pen and paper for a 12-week logbook tracking solution that tracks every trip and exports reports to your email at any time with the tap of a button.

How to Calculate Your Business Use Percentage

Whatever method you use, make sure you accurately track your mileage.

That way, you can determine what expenses are business-related and the percentage of time your vehicle is being used for work.

Here’s a simple formula to calculate the business use percentage:

(Distance travelled in work-related trips) / (Total distance travelled) X (100)

This percentage is then applied to your total vehicle expenses for that income year.

Let’s say your car expenses are as outlined below.

Car Expenses Amount in $
Running costs (e.g., fuel and oil) 1,800
Depreciation 8,000
Registration and insurance 3,000
Repairs 1,000
Total 13,800

Assuming your business use percentage is 40%, your deduction would be $5,520.

You can use this business percentage for 5 years, as long as your circumstances don’t change significantly.

In the event that your work situation changes before the 5 years are up, you may start a new logbook.

Logbook Method Vs Cents Per KM Method: How to Decide

Here are a few considerations to guide you towards the best method for your individual circumstances.

Cents per KM
You often use your car for business
Your vehicle incurs high fuel and maintenance costs
Keeping receipts is not your forte
Your car has a carrying capacity of one tonne or more
Your vehicle is new and depreciating fast
Your car has a carrying capacity of 9 passengers or more
Your vehicle is efficient and incurs low fuel and maintenance costs

The ATO can easily detect an invalid logbook.

So how do you ensure your logbook is ATO compliant so that your claim isn’t denied?

Use a logbook app that records every trip you make – personal or business – even if you forget your phone.

Serious logbook apps come with a handy little leave-in device that simply plugs into your vehicle’s OBD2 port (usually under the steering wheel, out-of-sight and out-of-mind) and syncs with your smartphone every time you drive your car.

One of these apps is GOFAR, which means it works in the background even when your smartphone runs out of battery.

So no matter where you go, your driving history will be accurately recorded and securely stored in the cloud.

If you use the 12-week ATO logbook recording method, GOFAR helps you easily identify the 12-week period with the most kilometres to maximise your claim amount.

It gets better.

GOFAR not only gives you a precise account of your expenses – it also constantly monitors your car’s health and fuel consumption, acting as your own private mechanic by alerting you of problems before you take your car for service.

It also keeps you from paying hefty fines by sending you reminders for registration and insurance renewals.

GOFAR installation doesn’t even require any tools or technical know-how. Just plug the adapter into your vehicle’s diagnostic port, download the logbook app from the Google Play Store or the App Store and pair it with your smartphone.

GOFAR function illustration using a silver Toyota car

Get the GOFAR logbook app to track all your mileage so you can focus on your work.

Never miss out on valuable tax deductions again. Start automatic logging today.

Track Work Mileage With GOFAR

  • Log, calculate and export business expenses at the press of a button
  • No cancellation fees
  • Available on iOS and Android

Get GOFAR now

GOFAR mileage tracker app on a white smartphone screen
Check Car Buy Now