What Tax Deductions Can I Claim on my Car Loan?

It’s about this time Australian car owners start trying to work out how they can improve their tax return. Through deduction claims, expenses, log books and all other claims to get more of your tax back each year.

Deductions are different for every person and relate to your specific situation, but we’ve put together a list of possible car related deductions to help you get a better return.

1. Vehicle Logbook

If you anticipate expenses exceeding the limit set by the previous method, maintaining a logbook becomes essential. This logbook must cover a minimum of 12 weeks and include details such as expenses, business use percentage, odometer readings, purchase price, loan details, and fuel and oil costs. Consult an accountant if you need assistance in setting it up correctly.

2. Claiming Car Expenses For Work Purposes

 As an employee, certain instances allow you to claim car expenses. While commuting between home and work remains private and non-deductible, you can claim expenses incurred during work-related travel. This includes trips between job sites, supply deliveries or pickups, and attendance at conferences or meetings. Additionally, if you have multiple places of employment, you can claim travel expenses between them.

3. Cents per Kilometre

One method of deduction involves using the cents per kilometre approach. Under this method, you need to keep track of the number of work-related kilometres travelled during the financial year, up to a maximum of 5,000km. Although no evidence is required, you must be able to substantiate your calculations (e.g., through diary records).

4. Buying a Business Car

If you purchased the vehicle with the intention of using it exclusively or partially for business purposes, you may benefit fully from the temporary full expensing and instant write-off, which expires on June 30, 2023.

The instant asset write-off scheme was introduced several years ago - in 2015 - which enabled small businesses to instantly claim depreciation on a work-related asset that cost $30,000 or less.

When the pandemic hit, the Government increased that limit to $150,000 until the last day of 2020, after which time it was dropped to $1,000 and made way for the temporary full expensing scheme.

Under this new scheme which now runs until 30 June 2023, the cost limit has been removed for eligible businesses. Find out more on temporary full expensing here.

5. Car Leasing and Tax Deductions

 When leasing a vehicle privately, you can still claim work-related travel expenses as mentioned earlier. In the case of leasing for business purposes, you may be eligible to claim the Goods and Services Tax (GST) on rental fees. The deductibility of lease payments, interest charges, and vehicle depreciation depends on the amount financed and its relation to the depreciation limit.

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