Motor vehicle and car deductions

You can claim a deduction for motor vehicle or car expenses when you utilise them for work-related duties.

What is defined as a car or other motor vehicle?

According to the Australian Taxation Office, a car is defined as a motor vehicle that carray loads of less than one tonne and less than 9 passengers. This definition includes many four-wheel drive vehicles.

What can’t you claim?

The expenses you incur for travel between your place of residence and your regular place of work cannot be claimed as a motor vehicle deduction. Your regular place of work is defined as the usual place where you start and finish your work duties. These expenses are required to put you in the position to earn your income. This is classified as private travel, even if you either:

  • Live a long way from your regular place of work

  • Work outside of normal business hours

In addition, you cannot claim a deduction for motor vehicle expenses that:

  • You pay for under a salary sacrifice or novated lease arrangement

  • Are reimbursed to you through your employer, who provides allowances for vehicle related expenses

What can you claim?

You can claim a deduction for work-related motor vehicle expenses if you use your personal car to:

  • Perform your work duties – for example, if you travel from your regular place of work to meet with clients

  • Attend work-related conferences or meetings that are away from your regular place of work

  • Deliver items

  • Collect supplies

  • Travel between two or more separate places of employment, but not if one of the places is your home – for example, when you have more than one job

  • Travel from your place of work or your home to an alternative place of work that is not generally your regular place of work – for example, a client’s premises

Calculating your motor vehicle or car-related expense deductions

There are two methods utilised to calculate deductions for car expenses. These include:

  • The cents per kilometre method

  • The logbook method

You can use a calculation tool provided by the Australian Taxation Office to work out your deduction for either method. This tool is found here: Work-related car expenses calculator

If you are claiming car costs for more than one vehicle, you can choose to utilise a different method to work out your expenses for each car. You are also able to change the method you use in different income years for the same car.

Cents per kilometre method

Under the cents per kilometre method:

  • A single rate is used (78 cents per kilometre for the 2022-2023 financial year).

  • You can claim a maximum of 5,000 kilometres per car. It is recommended that you keep records of all kilometres travelled.

The cents per kilometre rate includes all expenses you incur for:

  • Decline in value

  • Registration of the vehicle

  • Insurance

  • Maintenance

  • Repairs

  • Fuel costs

You are unable to add any of these expenses on top of the rate when you work out your deduction using this method.

Example: Car deduction using cents per kilometre

Johan travels a 27 kilometre round trip in his own vehicle once a week to meet with clients from the company’s head office in the city. Additionally, he travels a 106 kilometre roundtrip once a month to see clients in another location.

Johan figures that he was at work for 47 weeks during the 2021–2022 financial year, though he missed one customer meeting every week because he was ill. Additionally, he finds that despite spending five weeks of the income year on leave, he still completed 12 journeys to see clients which totalled 106 kilometres.

He works out his business kilometres as:

Number of weekly trips × Distance of weekly trip = Total weekly trip kilometres

46 × 27km = 1,242 km

Number of monthly trips × Distance of monthly trip = Total monthly trip kilometres

12 × 106 = 1,272 km

Total weekly trip kilometres + Total monthly trip kilometres = Total monthly trip kilometres

1,242 + 1,272 = 2,514 km

Johan works out his deduction for the 2021–22 income year as:

2,514 km × 72 cents = $1,810

In addition to the calculation example above, there are deduction tools in MyTax that will automatically determine your deductible amount by adding the kilometres you travelled during that financial year.

Logbook method

If you want to use the logbook technique, your logbook must document all of your business travel for a minimum of 12 consecutive weeks. Using the logbook approach:

  • Your claim is based on the fraction of your actual vehicle expenditures that is connected to your employment.

  • The term “expenses” refers to both ongoing expenditures and value loss, but excludes capital costs like:

    • The cost of purchasing your vehicle

    • The interest rate on any loans used to purchase it

    • Any upgrade or enhancement costs (e.g. adding paint protection or tinted windows)

To calculate your work-related usage, you must have:

  • A valid logbook

  • An odometer reading for the start and end of the logbook period during the income year, for each income year you rely on your logbook

You can also claim fuel and oil costs based on either your:

  • Actual receipts

  • Estimate of your expenses using the odometer records that show readings from the start and end of the financial year

You must keep records for all other motor vehicle expenses that you incurred during that income year. You are required to retain your logbook and odometer records for at least five years after the end of the latest income year, as this provides evidence to support your claims. You can keep a paper logbook, or use the MyDeductions tool in the ATO app to keep an electronic one.

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