From 1 July 2015, claiming deductions for cars has been simplified (although that is a term that doesn't really fit in the same sentence with 'tax').

There used to be four methods for claiming car expenses, but from 1 July 2015, two were abolished, leaving only the log-book method and the cents per kilometre method.

Cents per Kilometre method

The rate has been standardized at 66 cents per kilometre, irrespective of engine size.   This method doesn't need a log book but there must be a means of showing how the business use was calculated, such as a diary of work-related trips.   This method limits the claim to a maximum 5,000km a year, and if you wish to claim more, the log-book method is required.

If the rate paid to an employee is more than the ATO set rate of 66 cents (many Awards specify a higher rate), the employer must withhold tax from any amount above the 66 cents.

Log-Book Method

Keeping a log-book results in a higher claim, although there are more requirements because the claim is based on the business use percentage of the actual total of the car expenses (fuel, repairs, reg'n and insurance, depreciation).

To work out the business use, the taxpayer must keep a log-book of the odometer readings for a continuous period of not less than 12 weeks.   This must be performed once every 5 years, or when the usage materially changes (more than 10%).   Written evidence is needed for all expenses, other than fuel.   Fuel can be claimed based on either actual receipts or an estimate based on the odometer readings at the start and end of the year.

Log-book requirements are for cars, not commercial vehicles.   Generally, if the vehicle has a one tonne carrying (not towing) capacity it is commercial (most 4WD's are not; the ATO publishes a list of those that comply).   At any audit, whether GST, FBT or income tax, the ATO asks to sight log-books.   If not available, out of date, or not properly kept, the ATO used to reduce the claim to the (now abolished) one-third of actual expenses method, so probably will now use the cents per km.

On a car, the cents per kilometre could give a maximum claim of $3,300 (5,000km x 66 ¢ ), and the log-book method would be the business percentage of total expenses including depreciation.   If we assume those costs are $10,000 a year any claim in excess of 33% business use would exceed the cents per km method.

So, for the current financial year ending 30 June 2016, claiming car expenses is simpler, but not necessarily simple.