If you use a vehicle for work, vehicle costs can be one of the most valuable deductions in your return. The key is separating work use from private use, then using the right method and records to support your claim.
If you use your vehicle for income-earning work, many running costs may be deductible. The amount you can claim depends on your vehicle type and the method you use.
Typical deductible costs include:
Non-deductible costs: fines, infringement notices, and towing penalties are not deductible.
Only the work-related portion is claimable. Private trips are not deductible.
A trip may be deductible when it has a clear connection to your income-earning activities.
A key rule: travel between home and your regular workplace is generally private travel and usually not deductible — unless you qualify as operating from a genuine home-based business and the trip itself is work-related.
Vehicle travel may be deductible when you:
The ATO applies strict criteria before home-to-work trips can be treated as deductible.
You generally need a clearly identifiable business area at home that is not readily used for private purposes. A temporary setup in a shared household area is usually insufficient.
You may qualify as home-based where your workspace is:
If these conditions are met, travel from home to other work destinations may be deductible where the trip is work-related.
Examples of potentially deductible trips for eligible home-based businesses:
Private errands remain non-deductible.
All vehicle types can potentially give rise to deductible expenses, but claim rules differ by classification.
The ATO broadly treats vehicles as either:
For tax purposes, a car is generally a vehicle that cannot carry:
Motorcycles and similar vehicles are not treated as cars.
You normally need to own or lease the car to claim car expenses. If you use a relative’s vehicle under a private arrangement, running costs may still be claimable using the actual costs approach (subject to eligibility and records).
Examples include:
The method you can use depends on vehicle type.
For cars, you can generally use either:
For other vehicles (or certain non-owned arrangements), you generally use:
3. actual costs method
If you use cents per kilometre for a car, you cannot separately claim depreciation for that same car expense pool.
Under this method, you multiply eligible business kilometres by the ATO rate for the relevant year.
For 2024/25 and 2025/26, the referenced rate is $0.88 per kilometre, capped at 5,000 business kilometres per car (maximum $4,400).
Key points:
The ATO may ask how you arrived at your business kilometre figure.
This method uses a representative logbook period to determine your business-use percentage, then applies that percentage to eligible car expenses.
Your logbook should:
After the logbook period, calculate:
Even if you believe business use is 100%, records are still needed to support the claim.
You should also retain:
If your vehicle is not classified as a car, or the car methods do not apply, claims are generally made under the actual costs method.
You generally need to:
While a formal logbook may not be mandatory here, logbook-style records are strongly recommended to support business-use percentages and calculations.
If you are using cents per kilometre for car claims, you cannot also claim the vehicle purchase separately through that same method.
Vehicle purchase cost is generally claimed via one of two pathways:
As with running costs, only the work-related use percentage is claimable, supported by records (including logbook evidence where relevant).
Where eligibility criteria are met, eligible assets below the relevant threshold can be immediately deducted to the extent of business use.
Based on the source settings you provided:
If eligible, you can generally claim the business-use percentage of the cost in that year.
For 2025/26, the referenced car cost limit for depreciation purposes is $69,674 (car-specific context).
Because these rules are technical and change over time, it is sensible to get tailored tax advice before lodging.
Tax outcomes depend on personal circumstances. For advice tailored to your situation, speak with a registered tax professional and confirm current rules with the ATO.
