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Can I claim my car on tax in Australia?
The short answer is yes, a privately owned car can be a valid tax deduction but, as with anything dictated by Australian taxation law, the devil is in the detail.
Of course, claiming your car as a tax deduction is a great way to reduce the amount of tax you pay, and that’s something most of us find a pretty attractive proposition.
So what are the conditions? Well, we could fill page after page detailing tax law (goodness knows the ATO has done just that) but fundamentally, if you use your vehicle for business use, you can claim that portion of the car’s overall use as a tax deduction. The logic being that if you need your own car to fulfil your work obligations and tasks, then the costs to do so are legitimate work-related car expenses and, therefore, deductible. According to the ATO, travel expenses are claimable and so, therefore, according to the same ATO motor vehicle expenses are also claimable if they’re legitimate business costs.
The proviso is that the vehicle in question is either privately owned or leased by you. If the vehicle is company-owned or is part of your salary package or you have a car allowance as part of your monthly pay ATO says no; it’s no longer deductible.
There are basically two ways to claim vehicle running costs as a deduction, starting with a cents-per-kilometre formula. Which begs the question; how many km can I claim on tax under this method. And it’s a very important question. That’s because this method only works if your business travel in your car is below 5000km per year. The amount you can claim is worked out by multiplying the kilometres you travel for work by a flat cents per kilometre.
Okay, next question; how many cents per kilometre can I claim? This figure recently rose to 85 cents per km for the 2024 tax year. The 85 cents per kilometre is the ATO’s estimate of what it costs to run a car including fuel, registration, insurance and depreciation of the vehicle.
Although the ATO says you don’t need written evidence of the kilometres you travel for work, you might need to prove it, so keeping a diary of your work trips is a good idea. This deduction is also capped at 5000km, so it isn’t for everyone as, for instance, a courier or even pizza delivery driver might cover a lot more kilometres than that over a 12-month period.
For workers in that boat, there’s another system called the ATO logbook method which, as the name suggests, involves keeping a logbook of your business travel. You don’t need to record every trip all year, but you do need to keep the logbook up to date for a minimum of 12 weeks per year and that record needs to be refreshed every five years. The logbook will include the period it covers, odometer readings at the start and finish of each trip and the reason for the trip. From that info, the ATO can determine the total business kilometres you’ve travelled and what percentage that represents of your car’s total use (business and private).
So what doesn’t qualify as business travel? Obviously, that starts with any time you use the car for your own private use. That includes travel to and from work each day, even if you detour to the post office to pick up the company mail each morning. Overtime, odd work hours or no public transport to get you to work each day? Tough luck, says taxation network H and R Block, it’s not a business trip.
Like we said, anything to do with taxation can be a minefield of fine print and legalese. The safe bet is to contact a tax agent and put your individual case froward for a definitive answer on whether and what you can claim. Don’t forget to be specific with your questions, however, as a general answer often won’t suffice. Instead, ask things like can you claim fuel on tax; can you claim car insurance on tax and how much depreciation can I claim on my car.
Getting hold of a human from government and asking the ATO what can I claim, can be a bit more difficult. But the ATO’s website has this page that covers some of the broader issues of claiming car on tax and how can you claim a car on tax in Australia.
Check it out here.
This material has been prepared for information purposes only. It should not be taken as constituting professional advice and you should consider seeking independent legal, financial, taxation or other advice to check how the information relates to your unique circumstances.