UPDATED AUG 4, 2020 • 5 MIN READ
Depending on your situation, there can be different requirements, legal or otherwise, for record-keeping when it comes to your car expenses.
Your employer might specify which records they want, and the ATO also has rules that apply if you are claiming a tax deduction on your work-related car expenses.
In this article, we will look at how your mileage logging requirements change based on which reporting method you use.
Recording your driving in a mileage logbook is a great way to ensure that you are getting reimbursed for all of your work-related car expenses, with no limitation on how much you can claim (unlike the simpler cents per kilometre method, which has a cap of 5000 business km per year).
Using the logbook method, you must keep track of mileage and expenses in a mileage logbook for a minimum of 12 weeks. The amount logged can be extrapolated to cover the rest of the year (assuming that your expenses will follow the same pattern).
This 12 week period can take place at any time throughout the financial year - and if your car expenses fluctuate month-to-month, recording your mileage and expenses year-round may be a clever way to ensure that you maximise your tax deduction by accounting for all expenses and prioritising peak months.
The following details are required when using the logbook method:
Expenses like fuel, servicing, and other running costs can be claimed using the same percentage above - eg if your business use percentage is 50%, your running costs can be deducted at the same 50% rate. Make sure you keep all receipts associated with those expenses, as these will be used to justify your claims to the ATO or your employer!
Don’t forget - If you're claiming your car expenses as a tax deduction, you can only use the logbook method to claim expenses for a car that you own. The ATO will require evidence that you own the car to approve any car expense deductions. On the positive side, depreciation is also accounted for under the logbook method - calculated at 25% of the recorded value for your vehicle.
To submit a claim using the actual costs method, you need to collect the same information as you would in using the logbook method.
The only difference with the actual costs method is that you are required to record all of your expenses and mileage throughout the year, as your deduction is based on your actual costs. Compare this to the logbook method, where you are able to calculate your deduction based on any 12 week period.
Under the cents per kilometre method, the records you need to keep are much more straightforward. Whether your employer is reimbursing your expenses or you are claiming a tax deduction, your requirements are simple. You will need to record:
The total kilometres driven
If you are using the cents per kilometre method for your tax return, you will also need to show evidence that you own the car, as the standard rate accounts for ownership costs including depreciation, registration, insurance, fuel, and maintenance.
Although you don’t need to provide written evidence, you do need to show that you drove the kilometres being claimed. Common ways of showing this are through an automatic logbook application, or by providing diary records of work-related driving.
Paper, diary, account book, digital spreadsheets, CSV files, PDF files, and XLSX (Microsoft Excel) are all accepted by the ATO. In other words, the format does not matter as long as the right records are present.
Your employer should inform you which records they need, which includes the formats that they can process.
The ATO actually provides a digital logbook, but it does not include automatic trip logging. Paper logbooks are available from many newsagents, and are suitable so long as you remember to fill them in at the start and end of each trip.
Should you prefer an automatic solution, an automated mileage logbook app can help you to record everything you need to claim your work-related car expenses from the ATO or your employer.
It is a myth that the ATO requires you to record your odometer at the beginning and end of your trips.
There's currently nothing in the law that requires you to log odometer readings for each trip. When you use the logbook method of calculating your car expenses, you must record your odometer at the beginning and end of the period that the logbook covers.
However, do keep in mind that your employer might ask you to record odometer readings more frequently.
There are no requirements for exactly how you calculate your mileage as such, except that you have to record the mileage of each trip. That means either
The easiest way is probably to use a mileage app. There's a whole range of apps that are designed to solve the exact problem of tracking and recording your mileage, of which we're one. We provide mobile apps for users of iOS and Android and for both self-employed and employees.
If you drive the vehicle(s) for personal use as well, you also need to be able to show the portion of use that is for business. You work this out as a percentage of kilometres driven for both business and personal use. That means keeping a log of all trips and then calculating the share used for business.
Whether you are an individual taxpayer or self-employed, the ATO requires you to keep your records for five years from when you lodge your tax return, in case they need you to substantiate your claims.
As an employee, you might be asked to prove your expenses (which could include mileage for various reasons) later on. This can happen due to no fault of yours, so it is generally a good idea to keep copies.
Using a digital mileage log and tracker makes it more likely that you will have adequate records available if needed.
If you get audited, the ATO can ask for mileage logs, which are accepted in any of the formats mentioned above. They can also ask for proof of your expenses in the form of tax invoices or receipts.
To speed up the process and avoid errors, you can order your mileage logs and records by year, of course maintaining a minimum of five years’ data as per the ATO requirements.
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.