Date errors and duplicate odometer readings invalidate logbooks
A recent AAT case (Reid) highlights the importance of completing a logbook correctly if you want to deduct car expenses using the logbook method.
There are 2 statutory methods for an individual or partnership to work out car expense deductions – the logbook method and the cents-per-km method.
The latter is the simplest – you just multiply the number of business kilometres travelled by the prescribed amount (currently 68 cents per km, irrespective of the size of the car). But there is one problem – the number of business kilometres that can be taken into account is capped at 5,000. So, if your business kilometres exceed 5,000, you should consider using the logbook method.
There are specific rules about maintaining a logbook.
For example, the logbook must show the date the journey began and ended, the odometer readings at the start and end of the journey and the number of kilometres travelled. For the first year in which car expenses are claimed, the logbook must be kept for a continuous 12-week period (unless the car is held for less than 12 weeks, in which case the logbook must cover the whole period).
The problem for Mr Reid in the recent case was that his logbook did not comply with the rules, so the AAT agreed with the ATO that he could not use the logbook method. Instead, he was allowed a deduction using the cents-per-km method but, of course, only for a maximum of 5,000 km each year (2012, 2014 and 2015). As a result, the car expense deductions he was allowed ($11,450 in total – assuming Mr Reid drove a large car) were about $60,000 less than the amount he claimed using the logbook method.
So where did Mr Reid go wrong? Examples of problems with the logbook were:
- Inconsistencies between the day of the week and the date
- The same odometer readings on different dates
- Dates stating “customer visit” when the employer’s records show that he was sick and on personal leave
- Dates repeated.
Mr Reid did win one argument (not that it helped him in the long run) – the AAT considered that, given Mr Reid’s role as a “channel manager”, diary entries showing “customer visit” were sufficient to identify the relevant journey as a business journey (the ATO argued otherwise).