Don't Want to Keep a Vehicle Logbook - Then Don't!!
If you don't keep a compliant logbook and claim your motor vehicle costs on an actual cost basis then your claim may be disallowed by the ATO. This may not actually be the worst outcome for you because just maybe, the logbook percentage has been letting you down.
We know keeping a logbook can be a proverbial pain in the rear but did you know that you have an alternative to keeping a logbook and it may even give you a better deduction than your logbook method.
So, yes I am an accountant and I will demonstrate my point with some numbers. If you don't want to read the numbers just skip to the bottom conclusions section.
Instead of keeping a logbook you can claim on an actual kilometre basis for your vehicle costs multiplied by the mileage rate (From 1 July 2015 the only mileage rate for all cars is $0.66 a kilometre). This means you will not need to keep a logbook but instead will have to keep a diary of your appointments or have some other reasonable way to calculate your business mileage.
Here's How You May be Able to get a Better Deduction
Let's assume you travelled 6,000 kilometres annually for your work. Claiming on actual mileage travelled is limited to 5,000 kilometres per vehicle per person whereas your claim based on a logbook is calculated by multiplying your logbook percentage to all actual vehicle costs.
Therefore, your maximum claim on a mileage basis is going to be 5,000km's x $0.66 = $3,300.
Assuming your vehicle registration costs are $800 per annum, your weekly fuel cost is $50, and you spend say $1,000 a year on insurance and maintenance then your total cost to run your car is $4,400. Therefore if your logbook percentage is less than 75% you will get a greater deduction using the mileage rate.
But wait, there's more... so sharpen that pencil and save!
So you have actually travelled 6,000 kilometres a year for your work. Is there any way to claim more than 5,000 kilometres? Yes there is. The costs above for running your car would still be the same because these are actual costs right? but your actual travel is 6,000km's and we could apply the kilometre rate to all 6,000km's in some circumstances.
Remember, the kilometre claim is per person per vehicle so immediately I am thinking what about swapping cars with your wife, workmate, or next door neighbour even (just joking there but if you were dedicated to saving tax it could work for you) for a couple of months. Travel 1,000 km's in her vehicle an you can claim 1,000km in her car at $0.66 = $660 plus 5,000km in your car at $0.66 = $3,300 making a total claim of $3,960 based on a kilometre approach. That would mean your actual logbook percentage would have to be higher than 90% to make a logbook worthwhile.
My other thought was what if you purchased a new car during the year. Then you would be able to claim up to a maximum of 5,000km's per vehicle therefore allowing you to claim more than 5,000km's in total.
Now finally, what if both you and your wife changed vehicles during the year and your business travel was say 20,000 km's? Maybe with a bit of planning you could work it out so that each vehicle travelled 5,000km's thereby allowing you to claim all 20,000km's at $0.66 meaning a $13,200 deduction. That's $13,200 you don't have to pay tax on!!!
Obviously this would be an extreme outcome but my point is that it is possible.
As your accountant it's my job to let you know what is possible, to make sure that when you have options you are informed of those options, and when possible to work out which option gives you the best (lowest tax) outcome. Maybe you will choose to do a swap around of cars and maybe you won't, perhaps you have a good logbook and don't need to do another one for a few years so you have locked in the actual logbook percentage.
In any case be aware that you only have to make your decision at the end of the year and if you have two options then work out which one to use for the best outcome instead of blindly doing what you did last year and the year before that.
For more information on creative tax saving strategies please give me a call on (07) 54391600 or make an appointment to see one of our specialist advisors today.