Cut through the confusion about vehicle tax deductions. What's claimable, what's not, and how to maximise your deductions legally.
| Expense Type | Employee (Work Use) | Sole Trader | Company |
|---|---|---|---|
| Fuel | % work use | % business use | % business use |
| Registration | % work use | % business use | 100% |
| Insurance | % work use | % business use | 100% |
| Servicing/repairs | % work use | % business use | 100% |
| Interest on loan | % work use | % business use | 100% |
| Depreciation | % work use | % business use | 100% |
| Tolls | Specific trips only | % business use | % business use |
Important: "% use" means the percentage genuinely used for income-producing purposes.
You can claim vehicle expenses for:
You cannot claim:
You can claim the business-use percentage of vehicle expenses for:
You cannot claim the personal-use portion, including:
The company can claim 100% of vehicle expenses for company-owned vehicles. However:
How it works: Track your actual vehicle expenses for the year, then apply your business-use percentage (determined by a logbook).
Requirements:
What you can claim:
Example:
Best for: High-kilometre users, expensive vehicles, or business use over 50%.
How it works: Claim a set rate per business kilometre (85 cents for 2024-25), up to 5,000 km maximum.
Requirements:
What you can claim:
Example:
Best for: Low-kilometre users (<5,000 business km), those who hate paperwork, or as a simple option when actual expenses are low.
| Situation | Best Method | Why |
|---|---|---|
| >5,000 business km | Logbook | Cents per km caps at 5,000 km |
| Expensive vehicle | Logbook | Higher depreciation and running costs |
| High fuel costs | Logbook | Capture actual expenses |
| <5,000 business km | Cents per km | Simpler, no receipts needed |
| Old cheap vehicle | Cents per km | Low actual expenses anyway |
| Hate paperwork | Cents per km | Just estimate km |
You can change methods each year—choose whichever gives the better outcome.
Depreciation is often the largest vehicle deduction. It reflects the vehicle losing value over time.
$60,000 ute, 80% business use:
| Year | Opening Value | Depreciation (25%) | Business Portion (80%) |
|---|---|---|---|
| 1 | $60,000 | $15,000 | $12,000 |
| 2 | $45,000 | $11,250 | $9,000 |
| 3 | $33,750 | $8,438 | $6,750 |
| 4 | $25,312 | $6,328 | $5,062 |
Note: These are simplified examples. Your accountant will calculate exact figures based on your circumstances and current ATO rates.
The instant asset write-off allows eligible businesses to immediately deduct the full cost of assets (including vehicles) up to a threshold, rather than depreciating over time.
Rules change frequently. As of 2024-25:
Check current rules: The instant asset write-off threshold and eligibility criteria change almost every budget. Always confirm current rules with your accountant.
If a company-owned vehicle is available for employees' private use, Fringe Benefits Tax applies.
The FBT rate is currently 47%—the top marginal tax rate. This is applied to the "taxable value" of the benefit.
A company provides an employee with a $60,000 vehicle for work and private use:
This can wipe out the benefit of claiming 100% of expenses through the company.
Get advice: FBT is complex. Don't buy a vehicle through your company without understanding the FBT implications.
If your business is GST-registered:
Claim GST on:
Cannot claim GST on:
The ATO is strict about vehicle deductions. Poor records = disallowed claims.
Essential records:
Logbook requirements: Each trip must record:
Essential records:
Unless the vehicle is genuinely never used for private purposes (rare), claiming 100% business use raises red flags. Even 90% business use is unusual—most people use their car for some personal trips.
Claiming logbook method deductions without a valid logbook will result in disallowed claims. The ATO can (and does) ask for your logbook.
Claiming high fuel expenses but low kilometres (or vice versa) looks suspicious. Your claims should be internally consistent.
Claims like exactly $5,000 fuel or exactly 10,000 km suggest estimates rather than records. Keep actual receipts and records.
If you change jobs, move house, or your business changes, your business use percentage likely changes too. Update your logbook.
Interest on a car loan used for business purposes is tax-deductible.
Example:
If you refinance your vehicle loan, only the interest on the original loan purpose remains deductible. If you refinance and take extra cash for personal use, that portion's interest isn't deductible.
Begin a new logbook as soon as possible. 12 weeks of accurate records sets your business use percentage for 5 years.
Logbook apps (like ATO's myDeductions or commercial options) make recording trips easy. Some use GPS to track automatically.
If you're doing a business errand, try not to combine it with personal trips. A trip to a client site is deductible; a trip to a client then the shops is partially personal.
Sometimes having a dedicated work vehicle and a personal vehicle simplifies everything and maximises deductions. The work vehicle can be claimed at 100% (if genuinely only used for work).
Each financial year, compare logbook method vs cents per km. Your best option may change year to year.
Generally, no. Travel from home to your regular workplace is private travel, not deductible. However, if your home is your principal place of business (you genuinely work from home most of the time), travel from home to client sites may be deductible.
For logbook method: yes, keep all receipts. For cents per km: no receipts needed, but you need a reasonable basis for your km estimate.
Claim the work portion only. Either use cents per km for those trips, or if you use the logbook method, your business percentage will naturally reflect occasional work use.
Only if you incur unreimbursed work-related travel expenses. If your employer reimburses you or provides a vehicle, you can't claim the same expenses.
It depends on your circumstances. Buying gives you depreciation deductions; leasing gives you immediate deductions on payments. Your accountant can model both scenarios for your situation.
Understanding vehicle deductions is one part of the puzzle. Choosing the right vehicle and finance structure for your business is equally important.
This guide is general information only and not tax advice. Tax laws are complex and change frequently. Always consult a registered tax agent or accountant for advice specific to your situation.
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