April 6, 2016

Now is a good time to maximise your motor vehicle deduction

Mark Hann, Director

April is here and we are only a few months away from the end of the financial year so I am going through the task of recording my business trips using a fully compliant logbook. I haven’t had to do this for a number of years, however with the removal of the 12% cost method (and also the 1/3rd log book method) from 1/7/15, I have decided to complete a log book in order to maximise my motor vehicle deduction. If I didn’t complete the log book then the only method available for me to support a motor vehicle deduction would be the set rate method which would only give me a maximum deduction of $3300 (5000km * 66c/km).

Although I have only been going for about 4 weeks, I have been a bit surprised by the business % of ~70% which is higher than what I would have thought. So to this point the exercise appears to be worthwhile.

My takeaways for anyone considering their position would be;
  • You generally need to log your travel over 12 continuous weeks so now is a good time to start the process.
  • The removal of the 12% cost may leave you with a substantially reduced motor vehicle deduction compared to prior years if you don’t complete a log book.
  • There are FBT logbook apps available that can reduce the recording burden however make sure they are approved by the ATO or meet the numerous requirements for a compliant log book. Conversely the old style paper log book does the job.
  • The potential increase in the claim is not only relevant for this year but potentially for future years so you should consider this when calculating your potential benefit.
  • If you already use the log book method make sure it’s not more than 5 years old. If it is then you will need to complete a new log book.

Of course it goes without saying that you should consider your circumstances before deciding to act on this however if you have any queries please feel free to contact me or our office.

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