The simple answer – Yes!
If ever in doubt on whether you should or shouldn’t have a logbook, our recommendation is always to have one.
After all, it’s better to be safe, than sorry!
The Australian Tax Office (ATO) have recently warned about tightening-up on their approach towards people who own vehicles through their businesses – particularly, employers and tradies.
Even if your company or work car has been exempt from Fringe Benefits Tax previously, these days you may need to prove that any private usage is “minor, infrequent and incidental”.
This includes vehicles that carry over one tonne and were previously exempted.
According to the ATO, any travel that deviates from a normal route between home and work (by more than 2kms) will be considered private use.
Times have changed…
Some of you may view recording a logbook as an inconvenience or reminisce about the good ol’ days where you didn’t need one. But the times are changing and the ATO are tightening up.
We’re confident that the disappointment of not being able to claim desired motor vehicle expenses (due to not having a logbook) will be a much bigger inconvenience.
BUT there’s always a silver lining:
You only need to:
- Record your trips in a logbook for a continuous 12 week period and
- Start the logbook within the year you are planning to claim expenses for
Once this is done, the ATO is happy to use that 12 weeks as a guide for the rest of the year.
Providing the usage doesn’t really change, you only have to do a logbook once every 5 years, or when you purchase a new vehicle – whichever is earlier. If the driving habits change significantly, then a new log book needs to be done.
Do I need a logbook?
Although utes were once considered the traditional “work-horse” vehicle, they are now becoming more lavish and comfortable. This makes them handy for private and family use alongside work purposes.
As a result, some people are using their work vehicles, particularly dual cab utes, for leisure activities such as:
- Fishing with the mates,
- Taking the family on a holiday or even
- Towing a boat.
The ATO requests that you have a logbook because:
- It prevents people from abusing the system by claiming too much in vehicle expenses, over and beyond what they should be.
- It help them target those trying to avoid Fringe Benefits Tax.
If you have a vehicle that you use for work purposes and private use, it is critical to keep a logbook of your travel.
This gives the ATO tangible insight of the percentage breakdown of how the vehicle is used, in the case if an audit or if we are asked to justify the expenses claimed in your tax return.
Click here to read more about what you need to record in your logbook.
How does this sync in with Fringe Benefits Tax (FBT)?
The general assumption that all utes are FBT-free and lack audit activity by the Tax Office, is no longer true. Under the ATO’s new guidelines, many employers are finding themselves exposed to FBT on these vehicles.
There are some Fringe Benefits Tax exemptions available for vehicles not principally designed to carry passengers. But there are specific formulas and criteria we must follow to determine whether a vehicle can be classified as exempt.
Several years ago, we were able to refer to a list of except vehicles which consisted of mostly vans and utility vehicles. This made things much easier and the list included dual-cab utes.
But now, there’s no list.
For those who do “occasionally” use their work vehicle for private use, the ATO’s guidelines do allow “minor, infrequent and irregular” private use. But despite the description, this really only relates to commuting to and from work.
It does not extend to trips of leisure including:
- Day trips to the beach
- Going to the supermarket
- Taking the family on holidays
The Convenience of Logbook Apps for Your Phone
If you truly struggle with keeping a manual log book, then make things easier for yourself.
The ATO now accepts logbook apps to help calculate and report business use percentage. That’s why it’s a great idea to download a logbook tracking app to your phone.
Combined with the GPS recording odometer and the ability to track your kms to and from locations, an app can make the process of maintaining a log book a much smaller pain in the…..
A great app to check out is “Drivers Note”. Learn more about Drivers Note here.
In summary, we recommend that where a dual cab ute or work vehicle is owned and you wish to claim expenses either in your business or as an employee, you MUST prepare a 12 week Logbook to prove the percentage portion of business use.
Doing so will give you extra protection if the ATO decides to audit you or argue that you are not entitled to a motor-vehicle claim due to it not being predominately for business purposes.
Ignoring the concept of a logbook entirely or believing that what you “tell us” is business use isn’t going to be enough. Trust us, it’s not going to get you far in a debate with the ATO..
No logbook. No claim. It’s as simple as that.
If you need some help or advice in this area, ensure to give us a call on (03) 9762 7344.
Our team will do our best to help you and explain it in a simple way that you can understand.
With Knox Taxation and Business Advisory, you’re in good hands…