The motor vehicle log book method consistently delivers larger deductions than cents per kilometre for clients who drive more than a modest amount for business — but the ATO's record-keeping requirements are exacting, and a log book that fails scrutiny means the entire deduction can be disallowed.
Motor vehicle expenses are among the most commonly claimed and most frequently audited deductions for sole traders, partnerships, and companies in Australia. Getting the log book right from the outset protects your client's deduction and gives you reliable data to code vehicle expenses throughout the year.
What the 12-Week Log Book Must Record
Under section 28-125 of the Income Tax Assessment Act 1997 (ITAA 1997), a valid log book must be kept for a continuous 12-week period. The period must be representative of ordinary business use — a log book kept during an unusually busy or quiet period will not reflect the true annual pattern.
Each journey recorded in the log book must include:
- The date the journey was undertaken
- The odometer reading at the start and end of each journey
- The number of kilometres travelled
- The purpose of the journey (enough detail to demonstrate business purpose — "client meeting" is acceptable; "driving" is not)
The log book must also record the odometer reading at the start of the first journey in the 12-week period and at the end of the last journey. These readings anchor the business-use percentage calculation.
If the vehicle is used by multiple employees or by the owner for mixed purposes, every journey — including private trips — must be recorded, not just business trips. This is a common error: some clients keep a log only of business trips and leave private travel unrecorded. The ATO requires a complete picture of all use.
Calculating the Business-Use Percentage
The business-use percentage is calculated as:
Business kilometres ÷ Total kilometres during the 12-week period × 100
This percentage is then applied to the total actual vehicle expenses for the income year (fuel, insurance, registration, repairs, depreciation, and interest on a vehicle loan) to determine the deductible amount.
Example: During the 12-week log book period, a client travels 3,200 km in total. Of those, 2,080 km are recorded as business journeys. The business-use percentage is 65%. If total annual vehicle expenses are $14,800, the deductible amount is $9,620.
The same business-use percentage applies for every year the log book remains valid — which is five years, provided:
- The pattern of business use has not significantly changed
- The vehicle has not been replaced
- A new log book has not been started
Bookkeepers should diarise a log book review at the end of each five-year period, or sooner if the client changes roles, takes on additional business activities, or acquires a new vehicle.
What Counts as Business Use
Not all kilometres driven for work purposes are deductible. The ATO draws a firm line:
Deductible business use includes:
- Travel between business premises and a client's premises
- Travel to and from a second place of work in the same day
- Travel to purchase business supplies, attend industry events, or visit the bank for business purposes
- Travel between two separate workplaces for the same employer
Not deductible (private use):
- Travel between home and a fixed regular workplace (ordinary home-to-work commuting)
- Personal errands, even if run on the same day as business travel
- Travel taken during or relating to a holiday, even if some business is conducted
The home-to-work exclusion is a frequent source of audit adjustments. Clients who work from home occasionally may argue that driving to the office is a business journey, but the ATO's position is that travel from a home office to another place of business can be deductible — provided the home genuinely qualifies as a place of business. Advise clients to document their home office arrangements carefully if they intend to claim these journeys.
When to Switch from Cents Per Kilometre
The cents per kilometre method (section 28-90 of ITAA 1997) caps the deduction at 5,000 km per year, regardless of actual business use. At the 2025–26 rate of 88 cents per km, the maximum deduction is $4,400.
The log book method becomes more advantageous when:
- The client travels more than approximately 5,000 business kilometres per year
- The vehicle has high operating costs (a large SUV or ute will have higher actual expenses than a small sedan)
- The vehicle carries significant depreciation (new or expensive vehicles benefit most from applying the business-use percentage to a large depreciation base)
For a client with a $55,000 ute, 70% business use, and $18,000 in annual running costs including depreciation, the log book method delivers a $12,600 deduction versus the $4,400 ceiling under cents per km. The five-hour investment in keeping a 12-week log book is clearly worthwhile.
Record-Keeping and Audit Readiness
The log book and odometer records must be retained for five years from the date of lodgement of the relevant tax return (section 262A of the Income Tax Assessment Act 1936). In practice, advise clients to retain them for the full five-year log book validity period plus five years from lodgement of the last return in which the log book was used — potentially ten years in total.
Digital log book apps are acceptable to the ATO provided they capture the required data fields and can be exported in a readable format. Paper log books are equally valid. The format matters less than the completeness and accuracy of the data.
When coding vehicle expenses in the accounts, use a consistent account code structure: separate accounts for fuel, registration, insurance, repairs and maintenance, and vehicle depreciation. This makes it straightforward to calculate total annual vehicle costs and apply the business-use percentage at year end.
Flag any year where odometer records suggest total annual kilometres have changed significantly compared to the log book period — this is your trigger to recommend the client keep a new log book.