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Logbook queries for car expenses

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Two questions related to logbooks. Hopefully they're straight-forward, but I can't seem to find answers anywhere.

 

Scenario

  • I start using my current car (Car A) for business use on 1 Nov 2019 and stop using it for business on 30 Apr 2020 because I buy a new car (Car B) and start using it for business use from 1 May 2020.
  • During the time I use Car A for business (i.e. 1 Nov 2019 to 1 Apr 2020), let's say the business use percentage is 60%. At all other times during 2019-20 (i.e. 1 Jul 2019 to 31 Oct 2019 and 1 May 2020 to 30 Jun 2020), Car A is used solely for personal use. 
  • From 1 May 2020, let's say the business use percentage of Car B is consistently at around 90% because Car A is used most of the time if I need to drive for personal use .

 

Question 1

To work out how much to claim for car expenses using the logbook method, this page on the ATO website says:

  1. Keep a logbook.
  2. Work out your business-use percentage by
    1. dividing the distance travelled for business by the total distance travelled
    2. then multiplying by 100.
  3. Add up your total car expenses for the income year.
  4. Multiply your total car expenses by your business-use percentage.

If a car is only used for business purposes for part of the year, do I still include all car expenses during the income year in step 3? I can't find anywhere on the ATO website that provides further details about what to do differently (if anything) if a car is only used for part of the year for business purposes.

 

Question 2

The same page on the ATO website says "If you want to use the logbook method for two or more cars, the logbook for each car must cover the same period. The 12-week period you choose should be representative of the business use of all cars."

 

What am I supposed to do for the scenario above where the two cars are used for business purposes at different time periods during the same financial year that don't overlap, and the business use percentage for each car is different?

 

There are three options I can see for choosing the 12-week period, but none of them seem appropriate:

  • Completely during the time I use Car A for business (e.g. 1 Jan 2020 to 24 Mar 2020) - I recall reading somewhere that if you change cars during the year you don't need to do a logbook for the second car if the business use percentage doesn't change. However, in my scenario, the business use does change significantly so my understanding is that this option is not valid. In addition, it would disadvantage me since the actual business use for Car B Is significantly higher than Car A.
  • Partly before and partly after switching from Car A to Car B for business (e.g. 6 weeks before 1 May 2020 to 6 weeks after1 May 2020) - This would ensure that the business use percentage of Car B comes out more accurately (i.e. close to 90%). However:
    • The purchase of Car B will occur shortly before the switch to Car B for business purposes so for most of the period before switching from Car A to Car B, I would not yet have owned Car B. The logbook for Car B would include this period (approximately 6 weeks in the example) where I had not yet owned the car. Presumably this is an issue.
    • The logbook for Car A will include the period after switching from Car A to Car B. Since Car A is no longer used for business during this period, including it in the logbook will reduce the overall business use percentage of Car A. If the answer to Question 1 is that I can claim all expenses for Car A during the income year (including before and after the period I used it for business purposes) then this may be reasonable. If not, it disadvantages me.
  • Completely during the time I use Car B for business (i.e. 1 May 2020 to 23 Jul 2020) - Not sure if this is ever valid, but either way it's similar to the first option where the business use percentage of the two cars are different.

So... what am I supposed to do?

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Most helpful response

Taxicorn

Replies 0

@TaxNewb 

 

 

I would:

(1) Work out the Opening adjustable value for the Car A as of 1/11/19 to determine the value at which to depreciate it.

(2) Make sure I have a logbook for 12 weeks between 1/11/19 to 30/4/20.

(3) Claim any expenses that you incur from 1/11/19  to 30/4/20 at the business use %.

 

(4) Complete a Logbook when you purchase Car B, it doesn't matter if it goes beyond June 30, 2020.

(5) Claim any expenses that you incur from 1/5/20  to 30/6/20 at the business use %.

 

Logbook can be for different time periods if you don't already own both cars when you do the first one.

 

I think that you are over thinking this.Smiley Happy

 

 

1 REPLY 1

Most helpful response

Taxicorn

Replies 0

@TaxNewb 

 

 

I would:

(1) Work out the Opening adjustable value for the Car A as of 1/11/19 to determine the value at which to depreciate it.

(2) Make sure I have a logbook for 12 weeks between 1/11/19 to 30/4/20.

(3) Claim any expenses that you incur from 1/11/19  to 30/4/20 at the business use %.

 

(4) Complete a Logbook when you purchase Car B, it doesn't matter if it goes beyond June 30, 2020.

(5) Claim any expenses that you incur from 1/5/20  to 30/6/20 at the business use %.

 

Logbook can be for different time periods if you don't already own both cars when you do the first one.

 

I think that you are over thinking this.Smiley Happy