How to calculate your mileage reimbursement

UPDATED AUG 4, 2020 • 3 MIN READ

As we show you the fairly straight forward calculations that will help you calculate your mileage reimbursement, know that we are using the current ATO mileage rage. For more information on the 2020/2021 cents per km rate, see here.

If you're an employee, your employer might use a different rate than the one we use here. They may also have different rules for mileage reimbursement. If you haven’t already, take a look at our guide for employees here.

If you're self-employed, remember that if you’re using the cents per km method to calculate your tax deduction, you can claim a maximum of 5000km. If you have driven more than 5000km in the last financial year, you can use the logbook method instead. See our guide here for more information.

How do I use the cents per km rate to calculate mileage reimbursement?

We'll look at the two most common situations:

A: You drive your personal vehicle for business, and your company uses the ATO's standard cents per km rate to figure out how much you should be reimbursed.

You have kept records for the past month, and they show that you've driven 175km for business. The standard mileage rate is 72 cents per kilometre. To find your reimbursement, you multiply the number of kilometres by the rate:

[km] * [rate], or 175 km * $0.72 = $126.00.

B: You drive the company's vehicle for business, and you pay the costs of operating it (gas, oil, maintenance, etc.).

In this situation, you can't use the standard mileage rate because it's meant to cover both the cost of owning and operating a vehicle. In this case, you only operate it. Your company has instead set a rate of (for example) 21 cents per km. To determine your reimbursement, you run the same operation again:

[km] * [rate], or 175 km * $0.21 = $36.75

So here we can see that owning the car you drive for business results in higher reimbursement–but you also have higher costs, especially when you include the car's depreciation.

Finally - you are able to claim a reimbursement or tax deduction for more than one vehicle should you need to. Simply repeat the calculation at the relevant rate for each car!

What about the logbook method?

To calculate mileage reimbursement using the logbook method, you need to know the business use percentage of your car expenses. Let’s look at a simple example:

At the end of the financial year, your logbook shows a record of 15,000 total kilometres. Of the 15,000 kilometres, 75% were for business purposes.

After adding up all of your expenses for the year from the receipts and invoices you’ve kept, your total expenses (including depreciation) are $12,000 for the financial year. To calculate your mileage reimbursement, you just need to complete the following calculation:

[Expenses] x [Business Use %] = [Deduction]

$12,000 x 75% = $9,000

Once again, you are able to claim your deduction or reimbursement for more than one car. Simply maintain a separate logbook for each vehicle. If you are using a paper logbook, you can keep one per car. Some apps like Driversnote allow you to select the car that you are driving before tracking your trip.

Is there a difference between the logbook method and actual costs method when I calculate my deduction?

No. If you are eligible to use the actual costs method (that is, if you are submitting a tax deduction for a company or a trust, or claiming work-related expenses for a vehicle not classed as a car), the calculation you use is the same as what we described above for the logbook method. 

How do I calculate my business use?

Knowing the portion of a car's use that is for business (not personal use) is useful for figuring out how much you can claim for depreciation and other costs of operating that vehicle. Let's go through a quick scenario:

You've driven 200 personal km in a given period. During the same period, you've also logged 100km of business travel.

To figure out your business use, divide your business miles by the total number of miles driven. In our example, you've used your car for business 33% of the time: 100/300 = 0.33 or 33%. Make sense? 

Further examples

For more information, we suggest you continue reading our guides, as they provide specific information that may help you based on your own set of circumstances. 

 

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This material has been prepared for general informational purposes only, and should not be taken as professional advice from Driversnote. You should consider seeking independent legal, taxation, or financial advice from a professional to check how this information relates to your own circumstances. Relevant laws also change from time to time.