Logbook Method Vs Cents Per KM Method: How to Decide

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Home » Logbook Method Vs Cents Per KM Method: How to Decide

Which method are you using to track your car expenses? The logbook method or the cents per km method?

If you use your vehicle to travel a lot for business, then you probably cover many business kilometres per year.

If that’s the case, you spend a lot on fuel, repairs, and service. What’s more, your car depreciates quickly due to wear from being constantly on the road.

But did you know that you can claim these expenses as tax deductions from the Australian Taxation Office at tax time? You can, with the right records of course.

The challenging bit about keeping records and calculating your deduction claims is that it can be tedious and expensive if you’re not using the right tools.

A simpler method for sole proprietors to calculate their claims is the cents per km method. This method allows you to claim up to 5,000km for each car, per year.

Its greatest advantage is that it doesn’t require you to keep detailed log records showing exactly how many kilometres you travelled.

All you need to do is multiply your business kilometres by the ATO rate to get your deductible amount. Easy as pie.

You can further simplify the process by using the GOFAR car logbook app to record your business kilometres.

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Perfect for drivers who want to log their business kilometres.

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  • Access and share your expense claim summary from the convenience of your phone
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By reading this article, you will learn:

  1. You cannot claim expenses separately when you use the cents per km method.
  2. Your job determines whether the cents per km method or the logbook method is appropriate for you.
  3. You can record two trips as one using the logbook method.

What is the Cents Per Km Method?

The ATO cents per km method is a formula deductions for work-related expenses for your car.

It’s really simple. Establish your business kilometres and multiply that by the current ATO rate, which is 85 cents per km for 2023 – 2024.

There is a caveat though. You can only claim a maximum of 5000km per car, per year.

If you travel 5000 business kilometres in the 2023 – 2024 income year, your claim amount will be AU$4,250.

As each person can only claim up to 5,000km per year, the maximum deduction you can claim in the 2023 –2024 income year is limited to (5,000 x AU$0.85) = AU$4,250 per driver.

Secondly, you can’t claim expenses separately.

The ATO rate takes into account all vehicle expenses including fuel, servicing, and depreciation. If you’re on the road a lot, you spend more on fuel, repairs and servicing. Moreover, your car wears faster due to constant use.

However, since the cents per km rate uses a constant rate, your claim amount may be less than the actual expenses.

So how can you choose the appropriate method for you?

Let’s take Sarah, for example. She’s a graphic designer who only travels occasionally to meet clients or attend networking workshops. Her occasional travel always falls below 5,000km.

On the other hand is Carol, who makes deliveries. The business she works for has recently expanded to make deliveries in remote areas, and because of this, more and more people are shopping online than before. This means Carol makes more business trips than ever before, surpassing the 5,000km limit by far.

Considering the frequency of the business trips, Sarah can use the cents per km method, while Carol uses the logbook method.

Exploring the Cents Per Km Method in Sales and Courier Services

The cents per km method is versatile and can be applied in various business situations. The most important thing to consider is the frequency of travel in your business situation. This provides insight into your car expenses.

How might a pharmaceutical salesperson implement this?

They must begin by evaluating how often they use their car for business. If they meet clients in their healthcare businesses, as opposed to selling online, then they travel often.

They should also ask:

  • Is the business travel only within a specific region?
  • Is it all over the country?

If it’s within a specific territory, this might mean that they make frequent trips over short distances and can keep their annual business kilometres under 5,000km.

They can use the cents per km to make claims and on the plus side, they won’t need to keep detailed records.

Let’s apply the questioning process above to a courier service:

  • Is the travel frequent?
  • Is the business travel within a specific territory or all over?

According to research, over 80% of Australian consumers shop online at least once a month. Additionally, 30% of survey respondents usually conduct online purchases at least once a week. That’s a lot of packages to deliver.

We can safely answer that a driver working for an established courier service conducts frequent business trips. The business kilometres travelled are even more if the business offers fast delivery options.

One survey on motor vehicle use found that light commercial vehicles, which include courier vehicles, travelled 15.3 thousand kilometres on average, every year.

Since this exceeds the 5,000km allocated when using the cents per km method, individuals working in the delivery business can opt for the logbook method when claiming deductions.

Maximize Deductions on Extensive Business-Related Travel

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.

If it’s the first year you’re using the logbook method, you must maintain one for at least 12 continuous weeks during one income tax year. Ensure you choose a period that accurately represents your annual travel.

You must also record the following in the logbook:

  • The date you started keeping the logbook and the date you stopped maintaining it
  • Your odometer readings on the start and end dates
  • Total number of kilometres travelled

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

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

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

Did You Know? If you make two or more trips in a row on the same day, you can record them in your logbook as one trip. Convenient, right? The GOFAR app makes this easier by automatically logging these trips for you.

Want to stop manual logging and enjoy the convenience of automated tracking? Download GOFAR and experience the time-saving benefits it offers.

Great logbook app. Saves me heaps of time when logging all my trips. Stephen Alden, Verified Customer, Jun 2022

Cents Per Km or Extensive Travel Tracking: Finding the Right Fit for You

The following table compares the requirements and eligibility considerations to enable you choose the best method to claim deductions.

Consideration Cents per KM Logbook
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

Avoid Inconsistencies: The Importance of Accurate Logbook Entries

The ATO can easily detect an invalid logbook. For instance, they conduct audits and reviews of taxpayers’ claims.

During these processes, they may request additional documentation or evidence to support the claim deductions. Inconsistencies or inability to provide adequate evidence can lead to the detection of invalid claims.

They may also compare the logbook claims against a vast array of data sources, including employer information, bank records, and other relevant data. They can point out discrepancies by cross-checking and finding a mismatch between such records and your logbook.

An example of this is an employee claiming work travel deductions for a period when they were on holiday, or for expenses that the employer reimbursed.

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.

The GOFAR logbook app comes 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.

It also 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.

Maximize your tax deductions effortlessly. If you’re tracking your vehicle usage for work, using the GOFAR app with the cents per km method is a game-changer.

Just like our satisfied user who gave us a 5-star rating for our reliable and accurate tracking—even noticing when the car is moved in the driveway—you too can benefit from precise tracking.

I wanted a reliable, accurate mileage tracker. For that, this thing gets 5 stars. It picks it up when I move my car in the driveway. Steven Keyes, Verified Customer, Feb 2023

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.

To use GOFAR, simply 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

Frequently Asked Questions

Can I switch between the Logbook Method and the Cents Per Km Method in different tax years?

Yes, absolutely.

You can choose between the logbook method and the cents per km method in different tax years but don’t switch part-way in the middle of a current tax year.

What you can’t do is rely on one method and try to change to another one in the very same year.

Can I use the cents per km method to claim deductions on any vehicle?

No.

Sole traders and partnerships can only use the cents per km method to claim deductions for a car. can only use the cents per km method to claim deductions for a car. This refers to a vehicle that carries less than a tonne and a maximum of eight passengers. If in doubt, check the ATO site for further details.

What are some pitfalls to avoid when using the cents per km method?

When you do use the cents per km method, you must avoid:

  • Claiming more than 5,000km per car, per year
  • Switching between claim methods within the year as this is a hassle for your accountant
  • Claiming tax deductions for non-business trips. This goes against the ATO’s guidelines

Adhere to ATO guidelines by submitting accurate claims up to 5,000 business kilometres, and stick to claiming only for work-related trips.

What’s Next?

Now that you’ve settled on GOFAR to log your business kilometres, consider our selection of GOFAR subscriptions.

With a 4.5 star rating on the App Store, join over 20,000 users worldwide tracking their car expenses with our best-value GOFAR subscriptions.

Track Work Mileage With GOFAR

  • Log, calculate and export business expenses at the press of a button
  • No cancellation fees
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Danny Adams sitting in a chair with a laptop

Danny Adams

Co-founder of GOFAR and with a Computer Science background from Harvard University, and a Bachelor of Aerospace, Aeronautical & Astronautical Engineering (Honours), UNSW. I want to transform data from cars into useful services so -> drivers save time & money -> emissions fall -> Australian roads are safer. So we built an ATO-compliant logbook app called GOFAR. I write to help you understand how to use GOFAR to maximise business travel. Reach out via support@gofar.co.

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This content is provided for general information purposes only and does not constitute professional advice from GOFAR. We recommend consulting with an independent legal, taxation, or financial expert to ensure the information is applicable to your specific situation. Please note that relevant regulations and laws may evolve over time.
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