If you use your car for business, you'll be pleased with the Canada Revenue Agency's introduction of a new simplified logbook to track motor vehicle expenses. The move is part of the government's overall strategy to assist and ease the tax compliance burden for small-and medium-sized businesses.
The simplified logbook, unveiled last month, was originally announced in the 2008 federal budget in response to a recommendation from the Canadian Federation of Independent Business (CFIB). The organization identified the requirement to keep a logbook as "the most burdensome aspect of the motor vehicle tax provisions for its members."
The main goal of the logbook is to help businesses track and substantiate the portion of their motor vehicle used for business as opposed to personal travel.
Dan Kelly, senior vice-president of the CFIB, welcomed the government's initiative. "A sample logbook tracking the business use of a vehicle will help reduce three-quarters of the paperwork burden and give businesses the confidence that they have maintained their records properly," he said.
Here's how it works: Businesses can now maintain a full logbook for one complete year (starting in 2009 or later) to establish the business use of a vehicle in what's known as a "base year." In subsequent years, a three-month sample logbook can be used to extrapolate business use for the entire year, as long as the business usage is within 10% of the results of the base year.
The Income Tax Act itself doesn't actually require the use of a logbook to substantiate business kilometres. You just need to keep adequate records to support your claims.
Not surprisingly, the CRA suggests that the best evidence is an accurate logbook of business travel maintained for the entire year, showing for each business trip the destination, reason for the trip and the kilometres travelled.
Other evidence could include an appointment diary or perhaps a BlackBerry calendar, which may contain a historical log indicating clients visited and distances driven.
But what if you don't have a log? Are you out of luck? Not necessarily.
Last year, Ontario chartered accountant John Groscki was challenged by the CRA over his travel expenses and his lack of logs or detailed records. The CRA didn't dispute his actual motor vehicle expenses, but the personal versus business use of his vehicles.
The tax court judge was satisfied by Mr. Groscki's evidence that his extensive travel requirements, in connection with his work as an accountant, "are more properly reflected in his claim than the [CRA's]..."
The judge accepted his oral testimony as to the kilometres travelled by each of his vehicles and found the percentage of business use he attached to each vehicle "reasonable in the circumstances."