The deductions you can claim for the business use of a motor vehicle depend on the business structure you operate under, the type of vehicle you use and whether you also use the vehicle for private purposes.

 Your business structure affects your deductions

Your business structure affects your deductions

The motor vehicle expenses you can claim depends on your business structure (sole trader, company, partnership or trust), and whether your income includes personal services income (PSI).

Refer to the ATO website for the definition of personal services income (PSI).

Company or trust

If you operate your business as a company or trust, you can claim a full deduction for expenses you incur in running a motor vehicle that your company or trust leases or owns. If you, or other company or trust employees (or their associates), use the vehicle for private purposes, you may have to pay fringe benefits tax (FBT). The FBT cost is also tax deductible.

Sole trader or partnership

If you operate your business as a sole trader, or a partnership that includes at least one individual, you can claim:

• a full deduction for a business-purpose vehicle: a truck or van, or a smaller vehicle – such as a ute, wagon or panel van that has been heavily modified for business use – when private use is restricted to home-to-work travel and very minor other use
• a deduction for the business use of a vehicle you own, lease or hire under a hire purchase agreement – this can include an ordinary car, station wagon or four-wheel drive, or most other vehicles designed to carry less than one tonne or fewer than nine passengers.

METHODS USED TO CALCULATE YOUR ELIGIBLE MOTOR VEHICLE TAX DEDUCTION

Method 1 - Cents per kilometre

If you use the 'cents per kilometre' method:

• your claim is based on a set rate for each business kilometre travelled
• you can claim a maximum of 5,000 business kilometres per vehicle
• you do not need written evidence to show how many kilometres you have travelled, but we may ask you to show how you worked out your business kilometres
• you cannot make a separate claim for depreciation of the car’s value.

To work out how much you can claim, multiply the total business kilometres you travelled by the number of cents allowed for your car’s engine capacity – see the table below. This figure takes into account all your vehicle running expenses.

The rates are adjusted each year

Rates per business kilometre: 2014-15

Ordinary Engine	Rotary Engine	Cents Per Kilometre
1.6 litre (1,600cc) or less	0.8 litre (800cc) or less	65 cents
1.601 - 2.6 litre (1,601 - 2,600cc)	0.801 - 1.3 litre (801 - 1,300cc)	76 cents
2.601 litre (2,601cc) and over	1.301 litre (1,301cc) and over	77 cents

Example

Jane travelled 3,000 business kilometres during the income year. Her car has a 1.8 litre (1800cc) engine.

Jane worked out she could claim $2,280 for her vehicle expenses, as follows:

3,000 km × 76 cents per km = $2,280

End of example

If you use this method, your claim is based on a set rate for each business kilometre travelled, up to a maximum of 5,000 business kilometres.

Method 2 - 12% of original value

If you use this method:

• you can claim 12% of the original value of your car (subject to the car limit), so:
  • if you bought the car, you could claim 12% of the cost
  • if you leased the car, you could claim 12% of its market value from the first time it was leased
  • your car must have travelled more than 5,000 business kilometres during the income year
  • you do not need written evidence to show how many kilometres you have travelled, but we may ask you to show how you worked out your business kilometres.

Car limit

The car limit was set at $57,466 for 2014–15. The limit is reviewed each year.

Example

Raji’s vehicle cost $20,000. She had the vehicle for the full year and met the requirements to make a claim under this method. Raji worked out she could claim $2,400 for her vehicle expenses, as follows: that is, 12% × $20,000 = $2,400.

Method 3 - One-third of actual expenses

If you use this method:

• you can claim one-third of your car expenses
• your car must have travelled more than 5,000 business kilometres during the income year
• you must have written evidence of your fuel and oil costs, or odometer readings on which your estimates are based
• you must have written evidence of all your other car expenses.

You must also keep records that show:

• your car’s odometer readings at the start and end of the period during which you owned or leased it during the income year
• the car’s engine capacity, make, model and registration number
• how you worked out your business kilometres and any reasonable estimate you made.

Example

Kosta’s vehicle expenses totalled $9,000 for the income year. These costs were for:

• fuel and oil
• registration and insurance
• interest on a loan to buy the vehicle
• repairs and maintenance
• depreciation or lease payments.

Kosta met all the other requirements for claiming under this method. He worked out he could claim $3,000, as follows:

$9,000/3 = $3,000

End of example

If you use this method, you can claim one-third of your car expenses; however, your car must have travelled more than 5,000 business kilometres during the income year.

Method 4 - Keeping a logbook

If you use the logbook method, you:

• can claim the business-use percentage of each car expense, based on the logbook records of your car’s usage
• must keep a logbook so you can work out the percentage
• must have written evidence of your fuel and oil costs, or odometer readings on which your estimates are based
• must have written evidence for all your other expenses.

Example

At the end of the income year, Tim’s logbook shows he travelled a total of 11,000 kilometres, of which 6,600 were for business.

To work out the percentage the car was used for business purposes, Tim made the following calculation:

6,600/11,000 × 100 = 60%

Tim's total expenses, including depreciation, are $9,000 for the income year. To work out how much he could claim, Tim completed the following calculation:

$9,000 × 60% = $5,400

Getting a logbook

You can use pre-printed logbooks (available from stationery suppliers) or make your own.

Valid for five years

Each logbook you keep is valid for five years, but you may start a new logbook at any time.

If you establish your business-use percentage using a logbook from an earlier year, you must keep that logbook and maintain odometer readings in the following years.

Your first year

If this is the first year you have used the logbook method, you must keep a logbook during the income tax year for at least 12 continuous weeks. That 12-week period needs to be representative of your travel throughout the year.

If you started to use your car for business purposes less than 12 weeks before the end of the income year, you can continue to keep a logbook into the next year so it covers the required 12 weeks.

Two or more cars

If you want to use the logbook method for two or more cars, the logbook for each car must cover the same period. The 12-week period you choose should be representative of the business use of all cars.

Information your logbook must contain

Each logbook you keep must contain the following information:

• when the logbook period begins and ends
• the car’s odometer readings at the start and end of the logbook period
• the total number of kilometres the car travelled during the logbook period
• the number of kilometres travelled for each journey recorded in the logbook (if you made two or more journeys in a row on the same day, you can record them as a single journey). You will need to record the
  • start and finishing times of the journey
  • odometer readings at the start and end of the journey
  • kilometres travelled
  • reason for the journey.
  • the business-use percentage for the logbook period.

Recent Updates

NB: From the 2015/16 income year, methods 2 and 3 (the ‘12% of original value’ and ‘one-third of actual expenses’ methods have been abolished and a single cents per kilometre rate (66 cents) has been introduced for method 1 (the ‘cents per kilometre’ method), irrespective of your car’s engine capacity.

Important Note: If your car is provided by your employer, or as part of your salary package you cannot claim any of the car costs, whatsoever.

What you cannot claim

You cannot claim the cost of normal trips between home and work because that travel is private even if:

• You do minor tasks on the way to work, such as picking up the mail
• You travel back to work for a security call out or parent teacher interviews
• You work overtime and no public transport is available to use to get you home

We have log books and travel record cards available for you to use to keep the necessary records.