Cars are one of the most common areas where bookkeeping issues arise for small businesses. Between fuel, finance repayments, insurance, servicing, and private use, there are a lot of moving parts—and if records aren’t kept properly, it can create problems at BAS and tax time.
The good news is that staying on top of vehicle records doesn’t need to be complicated. A few good habits can make a big difference.
Keep a Valid Logbook
If a vehicle is used for both business and personal purposes, a logbook is usually needed to determine the business-use percentage.
That percentage is then used to work out:
- How much of the vehicle expenses can be claimed
- How much GST can be claimed on running costs
- The business portion of depreciation and finance interest
Without a valid logbook, it becomes much harder to accurately support claims.
A logbook generally needs to cover a representative 12-week period and should reflect actual vehicle usage.
Keep Vehicle Purchase & Finance Documents
When a vehicle is purchased, it’s important to keep:
- The tax invoice or purchase contract
- Finance or loan documents
- Trade-in details (if applicable)
These documents help ensure the vehicle is recorded correctly in the bookkeeping system and that the GST treatment is handled properly.
For financed vehicles, it’s also important to separate:
- Loan repayments
- Interest
- GST components
Simply coding finance repayments as “car expenses” often leads to incorrect reporting.
Don’t Forget Ongoing Expenses
Vehicle-related expenses can include:
- Fuel
- Servicing and repairs
- Insurance
- Registration
- Tolls and parking
Keeping receipts or using apps that automatically capture expenses can make bookkeeping much easier throughout the year.
Consistent coding of these expenses also helps keep reports accurate and reduces EOFY clean-up work.
Separate Business & Personal Use
One of the most common issues we see is private vehicle expenses being mixed through business accounts without clear records.
This can create problems with:
- GST claims
- Tax deductions
- Fringe Benefits Tax (FBT) in some situations
Clear records and a valid business-use percentage help avoid confusion later on.
Good Record-Keeping Saves Time Later
Cars are an area the ATO pays close attention to, particularly where claims appear unusually high or records are incomplete.
Accurate bookkeeping and proper documentation help ensure:
- Claims are correctly calculated
- GST is treated properly
- EOFY adjustments are easier
- Your accountant has the information needed to prepare accurate financials and tax returns
The Bottom Line
Vehicle expenses are a normal part of running many businesses—but they also require good record-keeping and accurate bookkeeping.
Keeping logbooks, invoices, and finance documents organised throughout the year can save a significant amount of time and stress later on.
If you need help managing vehicle expenses in Xero or making sure your bookkeeping is set up correctly, get in touch with our team—we’re here to help keep things running smoothly.
