What You Can (and Can’t) Claim as a Vehicle/ Car Tax Deduction

As tax time approaches, many business owners, tradespeople, and employees alike start to ask the same question: Can I claim my car or vehicle expenses as a tax deduction? The answer is — it depends. While there are genuine opportunities to claim vehicle-related deductions, the ATO’s rules are clear and often misunderstood.

In this article, we outline what you can and can’t claim, how methods differ, and what records you’ll need to keep maximising your tax return while staying compliant.

Understanding Work-Related vs Private Travel

A common mistake is to assume all work-related driving is tax-deductible.

Private Travel:

• Driving from home to your regular place of work is classified as private travel and is not deductible, regardless of the distance or frequency.
• Parking at or near your usual place of employment is considered a private expense.
• Parking a vehicle at home is also private unless your home is your principal place of business and your car is integral to your operations.

Work-Related Travel:

• Travel that’s part of your job — like visiting clients, travelling between job sites, collecting tools or equipment, or attending offsite meetings — is
• Parking and tolls incurred during business-related trips, such as client meetings or off-site work, are eligible for reimbursement.

These business-use kilometres, if properly recorded, can be claimed using the following two methods.

Claim Methods: Cents-per-Kilometre vs Logbook

1. Cents-per-Kilometre Method
   For those who travel less than 5,000 business kilometres annually, this method allows a claim at a fixed rate of 88 cents per kilometre for the 2024–25 financial year. This rate covers all running costs — fuel, insurance, registration, and depreciation. If you use this method, no additional deductions can be claimed.
2. Logbook Method
   If you use your car extensively for work, the logbook method is often more favourable. It requires keeping a detailed logbook over a continuous 12-week period (and updating it if your use pattern changes). This allows you to claim a business-use percentage of actual expenses, including:

• • Fuel and oil
  • Servicing and repairs
  • Registration and insurance
  • Car washes, detailing, car seat covers, sunshades, and more (if used for business purposes)
  • Loan or lease interest (for financed vehicles)
  • Depreciation (capped at $69,674 for the 2025 year) unless your car is designed primarily for carrying loads rather than passengers- see ATO website to understand if your vehicle has a limited private use exemption:

Even small items like tissues or air fresheners may be partially claimable — provided you use your vehicle to meet with clients or colleagues and keep appropriate records.

Additional Considerations for Tradespeople and Business Owners

If you are a tradesperson or own your own business, and use a van, ute or car that you personally pay for, you may be entitled to significant deductions — particularly if your vehicle is essential to your daily operations.

Some key points to note:

• Vehicles under $20,000: If you’re a small business, you may be able to claim an instant asset write-off for the business-use portion of the vehicle.
• Heavy vehicles and high-capacity Utes: If your Ute has a payload of over 1 tonne or you drive a vehicle that carries nine or more passengers, you cannot use the cents-per-kilometre method. Instead, you must use the Logbook method. Note: These large vehicles are exempt from the depreciation limit.
• Tool transportation exception: If your employer requires you to transport heavy or bulky tools that cannot be stored on-site, your commute from home to work may be tax deductible — but documentation is essential.

Leased or Financed Vehicles

If you lease or finance your vehicle, you may also be able to claim the interest portion of the repayments under the logbook method proportionate to your business use. Again, accurate record-keeping is key.

Don’t Risk a Mistake — Speak to Your Advisor

Car expenses remain one of the most commonly misclaimed areas at tax time. Maintaining a well-kept logbook and supporting records are essential in the event of an investigation or audit.

Whether you’re a small business owner, sole trader, tradie or professional, our Morrows advisors can help ensure you’re claiming what you’re entitled to.

Need help with preparing your Tax returns and understanding what you can and can’t claim? Contact your Morrows advisor today.

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