Logbook Guide
Cents per Kilometre Method Guide
This guide provides comprehensive instructions for using the Cents per Kilometre method to claim car expenses for business travel. It covers the requirements, calculation process, record-keeping, and an alternative method using a logbook.
Introduction
The Cents per Kilometre method allows you to deduct car expenses for business-related travel throughout the year by using a predetermined rate set by the Australian Taxation Office (ATO). This rate covers various car-related expenses, including registration, insurance, fuel, maintenance, repairs, and depreciation.
For the 2024-2025 tax year, the ATO rate is 88 cents per kilometre. The Cents per Kilometre method permits claiming up to 5,000 business kilometres per car
Requirements for Using the Cents per Kilometre Method
To claim car expenses using the Cents per Kilometre method, you must meet the following requirements:
Employment Status:
- You are an employed individual whose employer has not reimbursed business kilometres.
- You are a sole trader or part of a partnership where at least one partner is an individual.
Car Ownership:
- You own, lease, or hire the car under a hire-purchase arrangement.
Work-Related Kilometres:
- Your claim covers only work-related kilometres.
Vehicle Type:
- The claim is for a car as defined by the ATO: a vehicle capable of carrying less than 1 tonne and fewer than 9 people, including the driver.
- Motorcycles, buggies, and similar vehicles are not classified as cars.
How to Calculate Your Claim
To calculate your claim using the Cents per Kilometre method:
- Determine the number of business kilometres travelled in the car during the tax year.
- Multiply the total business kilometres by the ATO rate per kilometre.
Example:
For the 2024-2025 tax year, if you travel 3,000 km for business purposes:
- Calculation: 3,000 km × $0.88 = $2,640
- Claim: You can claim $2,640 in work-related car expenses.
Records You Need to Keep
While using the Cents per Kilometre method, you must maintain certain records:
- Proof of Car Ownership: Documentation showing you own or lease the car.
- Business Kilometres Calculation: Evidence of how business kilometres were determined.
Record-Keeping Guidelines
- Employees must keep records demonstrating how business kilometres were calculated.
- Sole traders and partners are not required to provide written evidence but may need to show calculations upon ATO request.
Recommended Records
To support your claim, keep the following information:
- Date of Each Trip
- Purpose of Trip: Business or private
- Distance Travelled: In kilometres
These records can be maintained in various formats, such as a physical logbook, spreadsheet, or mobile app (such as Synkli ✨🚀).
Retention Period
Maintain records for 5 years from your tax claim submission date for potential audits and tax checks by the ATO.
The Logbook Method as an Alternative
The Logbook method is an alternative to the Cents per Kilometre method, offering a different approach to claiming car expenses for business use:
- Expense Claim: Actual car expenses instead of a fixed rate per kilometre.
- Expenses Covered: Fuel, oil, registration, insurance, lease payments, services, repairs, tyres, electricity expenses, interest charges, and car depreciation.
Requirements
- Receipts: Keep all receipts related to car expenses.
- Detailed Logbook: Maintain a comprehensive logbook of all business trips.
Advantages and Disadvantages
- Pros: No kilometre limit (unlike the 5,000 km limit for the Cents per Kilometre method).
- Cons: Requires detailed record-keeping and management of receipts.
Conclusion
The Cents per Kilometre method provides a straightforward way to claim car expenses for business travel. By understanding the requirements and maintaining the necessary records, you can efficiently manage your tax deductions. Consider the Logbook method if your business travel exceeds 5,000 kilometres or involves significant car expenses.
For further assistance or questions, consult the ATO website or contact a tax professional.