Kellett Accounting Solutions Limited
Tax specialists for network marketing and home based business professionals
Log Books made easy
- Motor vehicle log books are an annoying fact of life for those of us who are self employed. However, just a few minutes a day for three months can make a really huge difference in the amount of vehicle expenses that you can claim in your tax return for three years.
- Without a log book, you can claim a maximum of 25% of your vehicle expenses (less if you estimate your usage is less than 25%). With a log book, you can claim whatever percentage you actually use.
- Firstly, pick a 3-month period that you expect to be fairly standard in terms of your car usage. You'll need to buy a log book (or I can provide you with a spreadsheet to print off). If you have more than one car, you can keep log books for all of them at the same time, so it's all done at once, or you can do them at different times; just remember that a log book is only valid for 3 years. (If you change cars but your vehicle usage for the new car is pretty much the same as for the old one, you can continue to use the old percentage.)
- Fill out the front of the log book with the vehicle details and (very importantly) the start date and odometer reading at the beginning of day one. Keep your log book and a pen in the car, and every time you travel for business, note down the date, destination, purpose of travel and the mileage at the beginning and end of the trip.
- You don't have to note down every trip that you take in the car, just the business ones. (This is not the place to note down petrol purchases etc, all we want is the mileage that you've travelled).
- At the end of the 3 months, note down the odometer reading at the end of that last day. Now there's a bit of number crunching. For each business trip, subtract the starting odometer reading from the reading at the end to get the number of kilometres travelled, then add the mileage for all your business trips together. Divide your business mileage by the total kilometres travelled (odometer reading at the end of the 3 months less the reading at the beginning) to get your motor vehicle business percentage. Easy!
- Trips you can claim:
- to purchase product for resale or business tools (e.g. stationery)
- to the post office / post box / bank
- to deliver products / information to customers or prospective customers
- to meetings / drinks / meals etc with clients or team members (as long as these are for your self employed business, not a job in which you're employed on a PAYE basis)
- to trainings / conferences
- business travel (to airports or driving out of town)
- from home to your place of work IF you are self employed or a contractor (who, if taxed, is taxed through withholding tax, NOT PAYE)
- Don't claim:
- trips from home to work for your PAYE job
- dropping children at childcare / school (unless the same trip also takes you to a business destination like the post box without you needing to move the car)
- personal trips (to the supermarket, hairdresser etc)
- If you forget to note down your mileage for a trip, you can find the mileage from a website like www.wises.co.nz; just enter the start and end point of the journey, and in addition to the driving directions, it will tell you the distance of the rip. (You'll need to double it for return trips).
- GPS technology may be able to track this but for tax purposes, you'll need to make sure you can download and print the details, and you'll probably still need to calculate the business / personal mix manually.
- If you don't have a log book, there is one other option that may allow you to claim more than 25% of your vehicle expenses. You can claim a vehicle allowance for the business mileage for the year, up to a maximum of 5,000km per car. While you will need to document mileage and trips in a similar way to the log book approach, for a vehicle allowance, you don't need to have 3 consecutive months of data, and you may be able to figure it out (using wises or a similar website) after the fact using your diary. (One thing to be aware of is that while the vehicle allowance may increase your tax deductible vehicle expenses, you can't claim GST on vehicle allowances, so your expenses for GST purposes will be lower).