The Logbook Method

The ATO logbook method lets you claim a percentage of your actual car expenses as a tax deduction, based on how much you use your vehicle for work. Unlike the cents per kilometre method, there's no cap on the kilometres you can claim, which makes it the better option if you drive a lot for business or have high running costs.

To use this method, you need to keep a logbook for at least 12 continuous weeks. That logbook then determines your business-use percentage, which you apply to your total car expenses for the year.

If you wish to compare the advantages of both methods thoroughly, read the logbook vs cents per kilometre article.

Who should use the logbook method

The ATO logbook method is suitable for sole traders, partnerships, and employees. You can apply it if:

• You’re the sole proprietor of your business and are looking to claim deductions for the business-related use of your personal car.
• You’re in a partnership with two or more people and jointly operate the business and want to claim deductions for partnership use of your vehicle.
• You are an employee, and your employer didn't reimburse you for your work-related vehicle expenses.

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What to include in a logbook

To comply with ATO logbook requirements, you need to keep records for at least 12 continuous weeks. Your logbook must include:

• The start and end dates of the logbook period
• Odometer readings at the beginning and end of the period
• The make, model, registration number, and engine capacity of the car
• The total kilometres driven during the period, split between business and personal use
• For each trip: the date, start and end odometer readings, kilometres travelled, and the reason for the journey

The ATO accepts electronic logbooks. You can use a dedicated mileage tracking app that records trips automatically and generates ATO-compliant reports.

Once completed, your logbook is valid for 5 years, provided your driving patterns remain broadly the same. You'll still need to record odometer readings at the start and end of each subsequent income year you rely on it.

Car expenses deductible with the logbook method

According to the ATO, you can claim the business-use percentage of the following running costs:

What you cannot claim: the purchase price of the car, loan principal repayments, or any improvement costs. These are capital costs, not running expenses.

Calculating your claim

To work out your deduction, you need two figures: your business-use percentage and your total car expenses for the year.

Step 1: Calculate your business-use percentage

Divide your business kilometres by your total kilometres during the logbook period, then multiply by 100.

Example:

• Total km driven: 6,000
• Business km: 2,000
• Business-use percentage: (2,000 / 6,000) x 100 = 33.33%

Step 2: Apply the percentage to your total expenses

Multiply your total car expenses for the income year by your business-use percentage.

Example:

• Total car expenses: $5,000
• Deductible amount: $5,000 x 33.33% = $1,666.67

There's no upper limit on what you can claim under the logbook method, unlike the cents per kilometre method, which caps claims at 5,000 km per year.

How to claim depreciation using the logbook method

The logbook method also lets you claim depreciation (decline in value) on your car, but only if you own the vehicle or hold it under a hire-purchase agreement. Depreciation is not available under the cents per kilometre method.

There are two ways to calculate it.

Depreciation methods: straight-line vs. diminishing value

The ATO sets the effective life of most cars at 8 years, giving a diminishing value rate of 25% and a prime cost rate of 12.5%.

Calculating depreciation using the diminishing value method

This is the more common approach, since it front-loads the deduction in the years when your car is losing the most value. Here's how it works using a $25,000 car at 70% business use:

Year 1

• Opening value: $25,000
• Depreciation (25%): $6,250
• Business-use portion (70%): $4,375 claimable

Year 2

• Opening value: $25,000 - $6,250 = $18,750
• Depreciation (25%): $4,688
• Business-use portion (70%): $3,281 claimable

Year 3

• Opening value: $18,750 - $4,688 = $14,063
• Depreciation (25%): $3,516
• Business-use portion (70%): $2,461 claimable

The deductible amount decreases each year as the car's value reduces. Note that the ATO applies a car cost limit for depreciation - for 2025/26, this is $69,674. If your car costs more than this, you can only use the limit amount when calculating depreciation.

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