The so-called 'log book method' is a popular way of claiming car expenses for tax purposes. Taxpayers are required to keep a log book for a minimum continuous period of 12 weeks, recording every business journey during that time. For each trip, certain details are required, such as the date of the trip, the odometer reading at the beginning and end of the journey, how many kilometres were travelled and what the journey was for. Once this is completed, the business kilometres are then calculated as a percentage of the total distance travelled over that time, and that percentage is then applied to all expenses related to the motor vehicle. So for example, if your business use percentage is 65% and you buy $100 worth of petrol, you can claim $65 for tax purposes.
For many taxpayers this is where it ends. They now have their business use percentage and this is applied every year into the indefinite future.
What is often missed though is that it is a requirement of the log provisions that a new log book be kept at least every five years.
This is not a recommendation but rather is mandated for a log book to be valid. Once five years has passed, the original log book can no longer be used and the log book method is therefore unavailable for claiming motor vehicle expenses unless a new log book is kept. A taxpayer would then have to revert to one of the other available methods for claiming, which may produce a less favourable result.
So it's essential that you keep a new log book at least every five years, and in fact we recommend completing a new one any time you believe that your usage is likely to vary by 10% or more.
The good news though is that that your log book only needs to be commenced during a financial year in order for it to be valid for the current period. That is, the 12 week period does not need to end by 30th June to make a claim using it for that year, as long as you start keeping the log book any time before 30th June.
With the end of the financial year fast approaching, it's probably a good idea to think about when you last kept a log book. If you think it may have been more than five years ago, and you want to continue using the log book method to make a claim this year, you can start keeping a new log book now (or any time before 30th June) and it will still be valid for this financial year.
It’s also important to remember if you are using the log book method that you must record your odometer reading at 30th June every year. Why not put a reminder in your diary now?
You can read more about the specific requirements for keeping a log book here.