As we approach yet another Fringe Benefits Tax year end, it is a timely reminder of the log book requirements for calculating Fringe Benefits tax, if you wish to use the Operating Cost Method
What is the Operating Cost Method?
The Operating Cost Method of calculating FBT on cars, is based on a log book record of travel which establishes the business percentage of motor vehicle expenses.
What expenses can you include?
- Petrol and repairs
- Imputed interests (if the car is owned)
- Lease costs (if the car is leased)
Employee contributions to expenses from after-tax income are deducted.
When do you need to keep a logbook?
For the first year in which car fringe benefits are calculated a logbook recording of each business journey must be kept for a minimum continuous period of at least 12 weeks at any time in the year. The 12-week period may overlap the start of an income year.
What details are recorded?
A journey is recorded by making an entry in the logbook, in English, containing the following information
- the day the journey began and ended
- odometer readings at the start and end of the journey
- the number of kilometres the car travelled on the journey, and
- the reason for the journey.
The record must be made at the end of the journey or as soon as possible afterwards.
How often do you need to prepare a logbook?
A logbook is generally valid for 5 years (ie. The same logbook may be relied upon for 5 years before another 12 week period must be recorded), although you are required to keep records of your opening and closing odometer readings to establish total kilometers traveled during a year.
What happens if you replace your car?
If a car is replaced, the business use previously established under a log book may be used for the replacement vehicle.
How long do you need to retain the log book records for?
A logbook must be retained:
- until the end of the latest income year in which it is relied on to support the calculation of the business use percentage for the car; and then
- A further five years.
There are various methods you can use to log your journeys. The most commonly used method is via a paper log book where you manually input your business travel times. There are also lots of apps where your data can be automatically or manually recorded in the app. This is a great way to save time when inputting your data, but make sure you download the right app for your purposes.