Ever wondered if you’re claiming your car expenses correctly? The rules for motor vehicle tax deduction in Australia can save you thousands—if you know how to apply them.
Why This Matters
Cars are one of the biggest expenses for Aussie small business owners. Yet, every year I see clients either overclaim and risk an ATO review, or underclaim and miss out on money they’re entitled to.
One client once told me: “I just kept fuel receipts and thought that was enough.” Unfortunately, it wasn’t. Without a logbook or evidence of business use, we had to fall back on the cents per kilometre method, and they missed out on over $5,000 in deductions.
The good news? With the right method and records, claiming your motor vehicle tax deduction in Australia doesn’t need to be stressful.
What Counts as a Motor Vehicle?
The ATO defines a “motor vehicle” as a car, ute, or van designed to carry less than one tonne and fewer than nine passengers. Larger vehicles, trucks, or buses fall under different depreciation rules.
Your business structure doesn’t change the definition, but it does affect how claims are managed—especially if the vehicle is company-owned and Fringe Benefits Tax (FBT) becomes relevant.
👉 Check the ATO’s official motor vehicle deduction guide for the 2024–25 year.
Business Structure and Deduction Methods
When it comes to your business structure, sole traders, partnerships, and companies can all claim motor vehicle deductions—but the way you calculate them may differ.
Cents Per Kilometre Method
This is the simplest approach.
- You can claim up to 5,000 business kilometres per year.
- The 2024–25 rate is 88 cents per kilometre.
- No receipts needed for running costs, but you must justify the kilometres with diaries or appointment records.
Example: 5,000 km × 88c = $4,400 deduction.
One client said: “I thought I could just say 10,000 km.” → The ATO won’t accept guesses, and the cap is 5,000 km.
Logbook Method
The logbook method requires more effort, but might deliver bigger deductions.
- Keep a logbook for 12 continuous weeks (usually valid for 5 years).
- Record business vs personal trips.
- Apply that percentage to all expenses—fuel, rego, insurance, servicing, depreciation, interest.
Example: $15,000 in annual car costs × 60% business use = $9,000 deduction.
I once had a client who thought fuel receipts alone would do. When we set her up with a logbook app, her claim doubled the following year.
Business Structure and GST Treatment
If your business is GST-registered, deductions must be calculated net of GST.
Example: $1,100 fuel bill → $1,000 deduction + $100 GST credit.
Missing this step means double-dipping—or losing credits you’re entitled to.
For more information, see business.gov.au’s GST registration page.
Depreciation and Car Limit
Cars are subject to the car depreciation limit. For 2024–25 it’s $68,108.
- Buy a car worth $90,000? You can only claim depreciation up to $68,108.
- Commercial vehicles (vans, trucks, utes over 1 tonne) are not capped the same way.
This limit often surprises business owners who buy luxury vehicles thinking they can write off the full cost.
Electric Vehicles and FBT
From July 2022, certain electric vehicles under the car limit can qualify for Fringe Benefits Tax exemptions if provided to employees or associates. This is a huge opportunity for small business owners considering EVs. But if the purchase price exceeds the luxury tax threshold, the exemption doesn’t apply.
Business Structure and Fringe Benefits Tax
If your company buys a car that’s available for private use, FBT applies. Directors are often caught out by this.
One new client told me: “I thought putting the car in the company’s name meant we could just claim everything.” The ATO disagreed—FBT applied, and it became more expensive than owning it personally.
The key is understanding whether the car is primarily for business or private use, and structuring ownership accordingly.
Records You Must Keep
Without records, the ATO won’t allow your claim.
For cents/km:
- Reasonable estimate of business travel (calendars, diaries).
For logbook:
- Logbook entries for 12 weeks.
- Odometer readings each year.
- Receipts for fuel, insurance, repairs, rego.
The ATO is clear: no logbook = no claim.
Work Travel vs Commuting
A common trap: thinking home-to-work travel is deductible. It’s not—unless your home is your primary place of business, or you carry bulky tools for work.
Deductible trips include:
- Travelling between client sites.
- Driving to suppliers.
- Trips to temporary job sites.
Non-deductible trips:
- Home → regular office commute.
- School drop-offs along the way.
One client told me: “I thought every trip was claimable.” → Not true, and it’s an easy way to attract ATO attention.
Step-by-Step Action Plan
- Decide your method—cents/km or logbook.
- Confirm if your vehicle is a car (subject to limits) or commercial vehicle.
- If GST-registered, calculate claims net of GST.
- Keep accurate records—logbook or app, odometer readings, receipts.
- Get advice if the car is company-owned (to avoid FBT surprises).
Conclusion:
So, motor vehicle tax deduction in Australia—what have we learned?
- Cars and commercial vehicles are treated differently.
- Two methods: cents/km (simple, capped) or logbook (higher claim, more effort).
- Records are non-negotiable.
- Depreciation capped at $69,674 for 2024/25.
- GST registration and business structure impact how deductions are calculated.
- EVs may be eligible for FBT exemptions.
- Commuting isn’t deductible, but business trips are.
With the right approach, you’ll claim everything you’re entitled to—without fear of the ATO.
Next Steps
📅 Want help maximising your motor vehicle claim? Book a meeting today: Book a Meeting Here
📘 Download our free business guides for more practical tips: Download Free Guides
Take control of your deductions this year, and make sure you’re driving your business forward with confidence.
