Question:
We utilise the operating cost method to determine our car fringe benefits liability. We are experiencing difficulties with obtaining valid entries for the ‘purpose of the journey’ requirement for the log book entries.
We are considering the use of a detailed legend whereby employees could write a number in the purpose of the journey area in the logbook and this would correspond to detailed description of the journey in the legend corresponding to that number.
In your opinion, would this information be sufficient to use for tax purposes? We would include a copy of the legend at the front of the log book.
Answer:
As a general rule, an entry recording the purpose of a journey should be sufficiently descriptive of the purpose of the journey to enable it to be characterised as a business journey and to correlate broadly with the distance travelled. It is best practice for this to be written up as part of the specific log book entry itself.
However, the fact that a particular journey is of a kind ordinarily associated with the employment duties of the employee is a relevant consideration in determining the extent of detail required for this purpose. For example, in our view it would be acceptable for an accountant working in Melbourne who is required to visit a client’s premises in suburban Essendon during working hours to record the purpose of the journey as ‘Client visit Essendon’.
Provided the legend outlining the various trip types is descriptive of the particular journey, and the journey is of a kind ordinarily associated with the employee’s employment duties, then this should be sufficient.