If you use a car for business or your company provides a vehicle, the driving must be allocated between personal and business . This allocation is based on the total number of kilometers driven and the kilometers driven for business and the CRA requires that a log be kept.
Why Track Kilometers?
When we file a tax return, we must be able to substantiate the expenses claimed and when the CRA looks at automobile expenses, one of the first things they ask for is the automobile log.
If you use your own vehicle for self-employment or can deduct the expense as an employee, the log is used to allocate the expenses. If the company provides you with a car, the log is used to determine the taxable automobile benefit.
For many, the log is a burdensome task that is either not kept at all or is maintained infrequently. Ultimately at tax time, the accountant is left with an estimate of the business use of the vehicle.*
Maintaining a log may capture missed kilometers and increase the expense one may take or reduce the taxable benefit.
What To Track
A log can be in any format you choose, but that remain in the vehicle. The log should have the following elements:
- One log per vehicle: Each vehicle’s expenses must be tracked separately and each vehicle must have it’s own log.
- Date: To establish the date of the trip.
- Total KM’s: The log should have your odometer reading from January 1st and December 31st to calculate the total driving for the year.
- Business Reason: The log should indicate the reason for the trip and why it was for business. The description can be brief: “Bob Smith/Client Meeting” or “Office Warehouse: Office Supplies.”
- Start Point & Destination: This establishes where and to: ie. “Office / Coffee Shop”
- KM’s driven: The reason we keep the log!
A column for parking expenses can also be added to capture coin operated parking meter cost.
* Note: Business use of a vehicle does not include travel between home and the office (or regular place of employment).
The log we suggest has the following columns:
|5/15||Bob Smith: Meeting||Office||Bob's office||6.5||$2.00|
There is an App For That!
Normally I do not suggest using your smartphone to track expenses or mileage if the data resides on the phone itself. If you are going to use a smartphone, be sure the data is in an accessible location such as Google Drive, Sheets or other storage.
There are a number of apps that are available that use your phone’s GPS to track the trips. The one I’ve used is TripLog – GPS Mileage Tracker. This program follows Canadian prescribed rules for mileage and allows you to export the data. The app is available for Android and Apple platforms and uses the phone’s GPS to record the kilometers driven as well as direct expenses. Since the app sync’s to the web, the data can be quickly extracted and used.