Car deductions - how to manage car related expenses for tax purposes

The ATO provides two methods of tracking car related expenses, these are explained below:

Cents per kilometer method:

This option is only available to drivers travelling less than 5,000kms per year for their purpose of rideshare work. In this case you can claim 66 cents per kilometer traveled for business purposes.

Logbook method

If you are travelling more than 5,000kms for business during one financial year and planning on claiming car expenses, the ATO requires that you to keep a logbook of distance traveled and the purpose for your travel. This must be kept for a minimum of 12 continuous weeks during the year and can then be used to calculate the annual car expenses and business use percentage. Each 12 week log book period can then be used for up to 5 years.

Other expenses which might be possible to claim include car running costs and decline in value of the car (but not capital costs). And don’t forget, you are required to maintain written evidence of all expenses claimed. This may be in the form of receipts. 

Your log book must show:

1. The period start and end dates and odometer readings at these times.
2. Total kilometers traveled during the 12 week period.
3. Number of kilometers which relate to work travel during the 12 week period.
4. Business use percentage for the period (this will be calculated using the figures from points 2 and 3 above). The log book method requires a bit of work up front to keep track of your travel over the 12 week period but often provides a great deduction outcome if you are travelling a lot and can be used for a substantial period of time after you have made the upfront time investment.