Claiming Work-Related Car Expenses as Tax Deductions

Work-related car expenses you can claim

The tax-deductible expenses are:

Registration and insurance
Fuel and oil
Electric vehicle charging
Servicing and repairs
Lease payments
Interest on a car loan
Parking and tolls
Decline in value (depreciation).

You can claim only the cost of work-related travel, such as trips to visit clients, to do the banking, purchase supplies for the company, attend meetings, see your tax agent as a sole trader, and so on.

You cannot claim for car trips from your home to the workplace. The one exception to this rule is for a home-based business, in which case you can claim for work-related trips leaving from home. Any cost for parking at or near your employer’s premises to attend to your job (or at your home for a home-based business) is also not claimable.

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Criteria for claiming

To claim any car costs as tax deductions, you must meet the following conditions:

The car must meet the ATO’s definition of a car - which means it has a carrying capacity of less than 1 tonne and fewer than nine passengers. You are not limited to one car - you can claim for all the cars you own that you use for work-related purposes.
You must personally own or lease the car or use it under a hire purchase agreement.
The car is registered in your name. However, you may be able to claim for a car registered in someone else’s name where there is a private arrangement for you to use it, and you are responsible for its costs.
You have paid the car expenses from your own funds, kept a record, and have any necessary receipts.
You can separate the business and private use of your car.
If you are an employee, your employer has not already reimbursed you for the costs, and/or you are not receiving a car allowance as part of your salary.

ATO methods of claiming

You can claim car expenses using two methods. You can only use one method at a time, but you can change it from one year to the next if you wish.

Cents per kilometre method

With cents per km, you claim a fixed rate for each km of work-related travel, capped at 5,000 business km per year. The ATO sets the rate at the start of each financial year (88c in 2024-25). This method covers all the claimable costs, so you cannot claim any other car expenses when you use it.

Logbook method

The logbook method is so-called because it requires you to keep a written record (‘logbook’) of trips, whether for private or business purposes. This enables you to work out your percentage of business use. You will also need to keep your receipts for running costs.

Once you’ve calculated your business-use percentage, you would then apply the percentage to your running costs. This results in the business-related driving expenses you can claim at tax time. You can also claim depreciation using the logbook method.

If you have an electric vehicle (EV) or a plug-in hybrid, you can claim home charging costs with this method and costs for charging at commercial stations. You will need to show evidence of how you calculated your home charging costs, such as an electricity bill.

However, if you drive a full EV only (not a hybrid), you can use the ATO fixed rate of 4.2c per km for all charging. If you do so, you cannot claim any commercial charging station costs.

Actual costs method

This method applies mostly to companies and is not suitable for employees. Sole traders would need to use one of the above methods, but there may be occasions when they might use actual costs. For example, if your vehicle doesn’t meet the definition of a car, you won’t be able to use either of the standard methods, but you may be able to use actual costs instead.

To use this method, you must maintain a logbook for all trips for the entire year and keep all receipts for running costs. Your logbook record lets you determine the business-use percentage to apply to your running costs before claiming them as deductions.

Situations when you cannot claim car expenses

There are situations where you cannot claim car expenses, even if they are work-related.

These are where:

The car is provided under a salary sacrifice or novated lease arrangement.
The vehicle belongs to someone else. You may be able to claim work-related travel costs, though.
You have employees who use their own car for work-related purposes. However, if you reimburse any workers for their costs (e.g. fuel or parking), you can claim those amounts as tax deductions.
You provide an employee with a vehicle. In this case, you could claim running costs, but you may also be subject to Fringe Benefits Tax if the worker uses the car for private trips.

Records you must keep

You need to be able to back up any work-related car expenses you claim at tax time.

For the logbook method, you must maintain a record of all private or work-related trips for at least 12 recurring weeks. For both the logbook and actual costs methods, you must keep receipts, tax invoices and documents related to the costs you claim.

With the cents-per-km method, you can claim work-related car expenses without receipts. You also do not have to complete a logbook. However, as an employee, you are required to keep a record of any work-related trips you make (e.g. in a diary or spreadsheet). If you are a sole trader, an estimate of your business driving is acceptable, but ideally, you should keep a written record of your trips to make it easier to provide evidence to the ATO if required.