As a business owner, you can claim a tax deduction for expenses for motor vehicles – cars and certain other vehicles – used in running your business.
The motor vehicle must be owned, leased or under a hire-purchase agreement.
If you operate your business as a company or trust, you can also claim for motor vehicles provided to an employee or their associate as part of their employment.
Expenses you can claim
You can claim:
- fuel and oil
- repairs and servicing
- interest on a motor vehicle loan
- lease payments
- insurance cover premiums
- depreciation (decline in value).
If you use a motor vehicle for both business and private use, you must be able to correctly identify and justify the percentage that you are claiming as business use. The percentage that is for private use isn’t claimable. This is an area where we often see errors made.
You can use a logbook or diary to record private versus business travel.
Travelling between your home and your place of business is considered private use, unless you are a home-based business and your trip was for business purposes.
Claiming a tax deduction for motor vehicle expenses
Here are 4 things to keep in mind when claiming motor vehicle expenses – such as fuel, oil, servicing and registration – for your business.
- If you operate your business as a sole trader or partnership (where at least one partner is an individual), the method you must use to calculate your deduction depends on the type of vehicle. For cars, you must use either the cents per kilometre or logbook method. For all other vehicles, you must use the actual costs method, where you claim the actual costs of expenses you incurred based on receipts.
- If you use the logbook or actual costs method, remember you can only claim the business-use portion of your motor vehicle expenses.
- If you are a company or trust, you must use the actual costs method to work out the deductions you are entitled to, regardless of the type of motor vehicle you use.
- If you use the logbook or actual costs method, you can only claim depreciation or decline in value for the business-use portion of the motor vehicle. The maximum you can claim as a deduction for the depreciation of your car is $64,741 for the 2022–23 income year ($60,733 for the 2021–22 financial year) or the cost of the vehicle (whichever is less). You may be eligible to claim depreciation under the temporary full expensing rules.
Reference: ATO website
Talk to our KMT tax adviser about the best way to calculate the deductions and the record-keeping requirements.
About our adviser: Chrisanthe Lekatis is renowned for her expertise in management accounting, virtual CFO services, and top-tier business advice. She empowers management with tailored strategies for success, streamlining processes to achieve efficient and cost-effective outcomes. Her commitment to building trust and lasting relationships goes beyond professional excellence; it’s a personal ethos. By actively listening and understanding her clients’ businesses and goals, Chrisanthe thrives on collaborative efforts to navigate challenges and collectively achieve their aspirations. Please do not hesitate to reach out if you need assistance.
This is general advice only and does not take into account your financial circumstances, needs and objectives. Before making any decision based on this document, you should assess your own circumstances or professional advice from a qualified accountant at KMT Partners.