motor vehicle log book & cents per km

 Author: BlakeATO(Community Support)Community Support

9 May 2022

Hi @Bob2021

Yes, there will still be a balancing adjustment. You're on the right track about it using the written down value, but there's a bit more to consider. The cents per km method takes depreciation into consideration, too, so there has to be a calculation for that.

Here's what it looks like:

1. Subtract the car's adjustable value (depreciation schedule value) from the termination (sale) value.
2. Reduce that figure by the personal use amount. This can be calculated using the formula: (sum of reductions ÷ total decline) x balancing adjustment amount, where:
   1. sum of reductions is equal to private use portion.
      1. for years where cents per km method was used, you must assume 20% taxable use (80% private).
   2. total decline is equal to the total decline in value since you bought it.
   3. balancing adjustment amount is the assessable or deductible amount calculated from the balancing adjustment.
3. Multiple the step 2 amount by the total number of days you've had the car for a taxable purpose (that is, used it for work).
4. Divide the step 3 amount by the total number of days the car was held for.
5. If the result is negative, include the excess deduction under work related car expenses. If the result is positive, include it at other income.

We talk about this in section 40-370 of ITAA 1997, which you can read on our legal database. For a more simple rundown, you can read about Balancing adjustment rules for cars on our website, too.