The value of a good car log book
As the end of the Fringe Benefits Tax (FBT) year is fast approaching, it’s time to once again turn at least part of our attention to the collation and submission of data relating to benefits provided to employees.
Once again, there have been a number of changes to the FBT Legislation, in addition to some clarification from the ATO on how they will be applying it. We suggest that if you require assistance with how the FBT may apply to your situation, please contact us and we can step through the process with you.
For most businesses the main contenders in this area are the provision of Motor Vehicles, Travel & Accommodation, and Entertainment – with cars probably topping the list for most employers.
The initial appeal of a family business acquiring a car via a company or trust entity is understandable. The entity may be in a position to claim a GST credit (capped at $5234 due to the Luxury Car Limit) on the purchase price, thus receiving an immediate cash flow benefit. However, this advantage may be short lived if the owners don’t also fully understand their obligations and ongoing application of FBT.
Therefore, the maintaining of a Log Book should be top of mind for all employer provided vehicles. This applies to not only cars, but also commercial vehicles, utes and vans, depending on the nature of use which is “available” to the employee / director – unfortunately, contrary to popular belief, there is no “blanket exemption” for any motor vehicles.
Whilst the mere term “Log Book” can elicit groans from most clients, the fact remains that it is the only way to truly audit proof your vehicle, against possible action by the ATO. And with the advent of smart GPS devices and phone “apps”, there is a real opportunity to keep solid substantive evidence, without the need to pore over a tiny yellow book for every outing.
Further, the absence of a log book or some other substantive basis for apportioning business vs private use on any vehicle, may also be limiting your ability to maximise your tax deductions or minimise your Fringe Benefits exposure.
The alternative to adequate log book record keeping under the FBT regime, is the required use of the Statutory Formula Method, which when applied to the GST Inclusive Base Cost of the car plus other non-business accessories, can be significantly higher than the true business use % applied to the vehicles operating costs.
** Things to keep in mind when commencing your log book :**
A log book is valid for 5 years, unless the circumstances of the usage / driver change significantly
- It can be renewed at any time, so if your business use % increases dramatically, you can maintain another book to correctly reflect the change
- It must be kept for a 12 week continuous period to provide a valid %
- One log book to be maintained for each vehicle
_NB: Fleet Cars have received a small concession from the ATO, in that it may be possible to “average” the business use percentage across a fleet of 20 pool cars held, if log books are maintained for at least 75% of the fleet _
- Odometer records must be kept showing total kilometres travelled for the period – which can be dissected into business and private ratios
- The details of each trip need to be recorded showing start & finish times, distance covered for the trip, the reason for the journey (“business” or “miscellaneous” will see the Log Book disregarded in the event of a review)
With some changes or enhancements to the way in which your business motor vehicle details are recorded and substantiated, you can provide us the tools to ensure that you receive the maximum Income Tax Deductions as well as minimising your Fringe Benefits Tax exposure, leaving you comfortable in the knowledge that you have something to rely on in the event of a review, under an increasingly active ATO.