Whether you’re a business owner or self-employed, calculating how often your vehicle is used for work-related reasons is paramount for receiving taxable deductions.
Aside from these deductions, though, it also helps you comply with taxation regulations, and there’s few better ways of calculating your vehicle expenses than using the logbook method.
So, throughout this article, we’ll be breaking down all you need to know about this method and how it’s ultimately able to save you money – which is naturally something all small business owners should be interested in.
What Is the Logbook Method?
The logbook method is essentially a detailed record of any of the business trips you or your staff have taken over a continuous 12-week period.
So, what’s actually written within this logbook?:
- The date for each of these trips.
- The starting and ending odometer readings for them.
- How far you’ve travelled (in kilometres).
- What the purpose of these trips was.
Remember, it’s not enough to just say these were ‘business trips’ – you have to provide evidence to explain why these were relevant for your business and how it roughly correlates with the distance you travelled.
After you’ve maintained this logbook for 12 consecutive weeks, you’re able to calculate the percentage of how often your vehicle was used for business-related reasons (and what the expenses are, fuel, maintenance, insurance, etc.) – best of all, this is valid for the next five years!
Benefits of Using The Logbook Method
Let’s take a look at why you should be taking advantage of this strategy:
- Accuracy and Fairness
Generally speaking, this method is one of the most accurate ways you can determine your work-related vehicle expenses due to how extensive it is. The fact that it takes into account your actual vehicle usage means you’re only claiming deductions for expenses directly related to your work, so it helps you avoid penalties and audits this way, too.
- Maximised Tax Deductions
Rather than using the cents-per-kilometre method or the 12% of the original value method (which is even broader), logbooks often result in higher tax deductions. This is especially true if you use your vehicle quite extensively for work.
- Flexibility
The Logbook Method considers any changes in your vehicle usage over time, too, meaning you can update your logbook if your work-related driving patterns change throughout the year.
- Savings on Motor Vehicle Costs
Aside from the obvious tax benefits, you’re generally able to monitor and subsequently optimise your vehicle expenses better since you’re keeping a log of everything.
Help Is Available For Organising Your Taxes
From getting your logbook up and running to general accounting services, our advisors can help save your business money. Contact us today for more information.
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