Motor Vehicle Claims - Logbook Method
If you claim a portion of your total motor vehicle expenses via the logbook method, you need to supply all invoices for Registration, Insurance, Repairs & Maintenance, Servicing and Sundry Expenses for the entire tax year. Fuel can be estimated using opening and closing odometer readings for the tax year. The original purchase documents are needed to calculate depreciation and finance documents are needed to calculate the deductible portion of any leasing arrangement. A logbook must also be kept for 12 consecutive weeks during the year showing the percentage of travel that is work/business related vs the percentage that is private in nature. This logbook need only be prepared once every 5 years (as long as your circumstances remain the same – if you were to stop driving at all for work after the second year, it would obviously not be correct to continue to claim motor vehicle expenses at your previous logbook percentage). Please note that travel to and from work is not work/business related travel in most circumstances. Please click here for more information on substantiating a motor vehicle expense via the logbook method. If you do not have sufficient substantiation to make a logbook claim, you may still be able to claim motor vehicle deductions via the cents per kilometre method.
An ATO review or audit requires evidence of all deductions and proper substantiation documentation (such as log books and diaries). If the appropriate substantiation and evidence cannot be provided, the unsubstantiated claim will most likely be reduced or denied completely.
If this happens, there is also a penalty applied by the ATO. Along with the possibility of a large reduction in your refund from the ATO and associated penalties/fines, there may also be a significant cost associated with preparing your documents for ATO requirements. Our professional costs can be far in excess of the original tax return cost, even if the ATO don't adjust anything in your return. We do offer Audit Insurance which covers the professional costs associated with ATO reviews and audits. However, this insurance does not cover you against any reduction in refund from the ATO and/or penalties and fines applied by the ATO as a result of your audit.
The substantiation required for an ATO audit depends upon the type of claim. The amount claimable on your tax return is only the portion that you actually paid for (not reimbursed to you by an employer or third party) and only claimed to the extent that the cost was business/work related (private use must be apportioned and removed from the claim). Tax invoices/receipts must be available to supply to the ATO upon request and generally a line item on a bank or credit card statement is not sufficient evidence.
Please note that as your tax agent, we do not need you to provide us with any invoices or any other form of substantiation such as logbooks or diaries. However, if you were ever to be audited, you would need to show all forms of substantiation for all claims to the ATO.