In the case of Reid and Commissioner of Taxation (2019), the Administrative Appeals Tribunal of Australia held that a taxpayer could not substantiate tax claims for car expenses using the ‘log-book’ method.

The individual taxpayer worked for two employers as a ‘channel manager’ for around five years. The key question facing the Tribunal was whether the taxpayer was entitled to work related car expenses of almost $72,000 and additionally, other work-related expenses such as stationery, reading materials and home office costs.

The Australian Taxation Office (ATO) concluded that the taxpayer had failed to retain a valid logbook of the car usage and was only eligible to make a claim based on a method called ‘cents per kilometre’. This claim however would have been less favourable to the taxpayer as it was considerably lesser in terms of costs claimed.

The reason for the logbook’s ‘failure of validity’ was that it was not kept in accordance with the Income Tax Assessment Act 1997. The Tribunal and the ATO were on the same page. The taxpayer was not entitled to using the logbook method to claim or calculate the work-related car expenses.

For the logbook method to be considered valid, the keeping of the logbook should have been contemporaneous and with no inconsistency in the details.

Upon the decision, the taxpayer faced a financial penalty for failure to take reasonable care in complying with tax law.


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