ATO Logbook Method Explained

If you use your car for work or business, understanding on how to claim work-related car expenses on your tax return can save you money. In Australia, the Australian Taxation Office (ATO) allows two methods for claiming motor vehicle expenses: the logbook method and the cents-per-kilometre method. This comprehensive guide explains the logbook method in clear terms for sole traders and individual taxpayers.

We’ll cover what the logbook method is, why it’s important for tracking work-related car expenses, how to maintain a compliant vehicle logbook (including odometer readings and business-use percentage calculations), and how it compares to the cents per kilometre method. We’ll also outline the legal requirements (the “logbook” rules in tax law and ATO guidelines), provide a step-by-step guide to keeping a valid logbook period, explain how to calculate your tax deduction (incorporating depreciation and running costs), and share best practices for record-keeping.

By the end, you’ll know how to use the logbook method to maximise your car expense claims while staying fully compliant with Australian Taxation Office rules.

What Is the Logbook Method and Its Purpose?

The logbook method is one of two ATO-approved ways to calculate your motor vehicle expenses. Rather than using a flat rate, you keep a logbook over 12 weeks (continuous weeks) to:

• Record every trip’s start/end odometer readings
• Note the purpose of each journey (business vs private)
• Calculate your business-use percentage of total kilometres

You then apply that percentage to your actual vehicle expenses, fuel, maintenance, insurance, depreciation, registration, and lease payments to work out your tax deduction. This ensures you only claim the portion of costs genuinely incurred while earning income (think client meetings or site visits, not private use or normal commuting). Although it demands more record-keeping, the logbook method often delivers a larger deduction if you drive frequently for work or have high running costs.

Why Keeping a Logbook Matters for Your Car Expense Claims

Keeping a proper vehicle logbook isn’t just a good idea, it’s mandatory under the Logbook Method rules. You need to record every work-related trip with start and end odometer readings, trip purpose and distance so the ATO can verify your claim.

Main benefits and requirements:

• ATO compliance: Must record every business trip (date, odometer readings, purpose, kilometres)
• Accurate business-use %: Reveals the true portion of fuel, servicing, insurance and depreciation you can claim
• Separation of private vs business: Prevents accidental claims for normal commuting or personal errands
• Audit protection: A compliant 12-week logbook plus receipts provides a rock-solid paper trail if the Australian Taxation Office reviews your return
• Maximised refund: Detailed records often uncover higher business use than the capped cents-per-kilometre method

By maintaining a neat, up-to-date logbook period and holding onto your receipts, you’ll satisfy the ATO’s substantiation rules and unlock the maximum, fully compliant deduction for your car expenses.

Finally, if you’re ever audited, nothing beats a neat 12-week logbook and matching receipts. Rather than risking penalties for unsubstantiated claims, you’ll have a solid record showing every kilometre and dollar you legitimately spent on work-related vehicle use.

Key Components of a Compliant Logbook

To use the Logbook Method, your records must tick several ATO-mandated boxes. Here’s what your vehicle logbook needs to include:

1. Logbook Period & Vehicle Details

• Duration: At least 12 continuous weeks
• Dates: Start and end of your logbook period
• Odometer readings: Opening and closing figures
• Total number of kilometres driven in that period
• Car info: Make, model, engine capacity, registration number

2. Trip Entries

• Every journey: Record all trips, business trips, and private trips for accuracy
• Details per entry:
  • Date (and end date if multi-day)
  • Purpose (e.g. “business purposes: client meeting” or “private use”)
  • Odometer start/end
  • Distance travelled (business kilometres)
• Combined entries: You can group same-day trips into one entry if it is easier

Business-Use Percentage

Once your 12-week period is done, total your work-related kilometres and divide by the period’s total kilometres. Multiply by 100 for your business-use percentage (e.g. 6,600 km business ÷ 11,000 km total = 60%). This percentage is what you’ll apply to your total car expenses when calculating your tax deduction.

Receipts & Expense Records

• Keep all receipts for fuel, servicing, repairs, registration, insurance, lease payments and any other running costs.
• If you miss a fuel receipt, use odometer readings to make a reasonable estimate, but aim for full documentation.
• Retain purchase invoices or finance agreements for depreciation calculations.

By covering these components, logbook period & vehicle, detailed trips, business-use %, and expense evidence, you’ll build a logbook that satisfies ATO compliance standards. Once established, it can back your claims for up to five income years, provided your usage pattern remains representative.

Logbook Method vs. Cents-Per-Kilometre Method

Aspect Logbook Method Cents-Per-Kilometre Method Calculation Basis Actual expenses × business-use percentage Flat ATO rate (e.g. 88 c/km) × work km Rate & Cap No km cap Max 5,000 km per car, per year Expenses Covered Fuel, maintenance, insurance, registration, depreciation All running costs included in rate Record-Keeping 12-week logbook + all receipts; retain 5 years No receipts; must show how km were calculated Best for High business km, high vehicle expenses Low business km, minimal record-keeping

Tip: You can mix methods across cars or change year-to-year. Use the ATO’s Work-related Car Expenses calculator to compare.

Legal Requirements & ATO Guidelines

• Subdivision 28-G, ITAA 1997 mandates a 12-week logbook, odometer records and written evidence of all car expenses.
• Your logbook period must be broadly representative. Start a new logbook if your travel pattern changes.
• A compliant logbook is valid for up to five financial years, with annual odometer readings.
• Entries must be in English and recorded as soon as practicable.
• You must be the owner or lessee of the vehicle to claim expenses.
• The ATO can audit at any time; failure to produce your logbook or receipts may lead to denied deductions and penalties (ATO Practice Statement PS LA 2005/7).

How to Create a Valid Logbook: Step-by-Step Guide

• Choose & record your 12-week period and opening odometer reading.
• Log every trip: date, purpose, odometer start/end, business kilometres.
• Record the closing odometer and confirm the total kilometres.
• Calculate business-use %: (work km ÷ total km) × 100.
• Document vehicle details: make, model, engine capacity, registration.
• File receipts: fuel, servicing, registration, insurance, lease payments.
• Retain annual odometer readings; restart if usage changes.

Download our Free Lodge Book

Calculating Your Tax Deduction

• Sum all vehicle expenses: fuel, maintenance, insurance, registration, parking, tolls, running costs, and lease/loan interest.
• Compute depreciation using ATO diminishing value or prime cost (within car cost limit).
• Add totals: running costs + business-portion depreciation = total car expenses.
• Apply business-use %: e.g. $7,400 × 60% = $4,440 deductible.

Long-form insight: By using your actual costs and business-use percentage, the logbook method can outrank the cents-per-kilometre cap. An ATO example shows $9,000 total costs at 60% business use, claimed $5,400 versus $4,400 under the flat rate.

Best Practices & Next Steps

• Log trips promptly with a logbook template or the ATO’s myDeductions app.
• Organise receipts digitally, noting context on each invoice.
• Choose a truly representative 12-week period; start new if work changes.
• Label & archive old logbooks and receipts for five years.
• Leverage technology: GPS-enabled apps, digital folders, auto-backups.
• Seek professional advice for complex cases, rideshare, luxury vehicles or mixed-use.

Ready to maximise your car expense claims?

• Start your 12-week logbook today, record that opening odometer reading.
• Download our free logbook template and print or save it.
• Gather and organise receipts for every vehicle expense.
• Review your business-use % annually; restart if patterns shift.
• Consult a tax expert for company cars or other complexities.

With a compliant vehicle logbook, meticulous record-keeping, and the right business-use percentage, your next tax time will be stress-free and more rewarding. Happy logging and safe travels!