Car expenses: what’s under the bonnet at tax time?

If you use your own car for work purposes (this may be a car you own, lease or hire under a hire-purchase agreement), you can claim a deduction using either the cents per kilometre method or logbook method.

You can claim a deduction for car expenses if you use your car to:

• Perform your work duties
• Attend work-related conferences or meetings away from your normal workplace
• Travel directly between two separate places of employment if neither of the places is your home
• Travel from your normal workplace to an alternative workplace and back to your normal workplace
• Travel from your home to an alternative workplace and then to your normal workplace
• Perform itinerant work – meaning you had shifting places of employment (for example, you regularly worked at more than one site each day before returning home).

You can also claim tax deductions if you share your car or rent your car using a car-sharing service; this includes full program membership fees, plus expenses such as registration, insurance, servicing, cleaning, depreciation and fuel. 

Using someone else's car or other vehicle

If you use someone else's car or other vehicle (that is not defined as a car) for work purposes, you may be able to claim the actual expenses (such as fuel) as a work-related travel expense in your tax return.

It’s worth noting a vehicle is not considered a car if it is a motorcycle or vehicle with a carrying capacity one tonne or more, or vans that can carry at least nine people.

When you can't claim

Of course, it’s equally important to know what you can’t claim, with many people thinking that just using their car to get to work is a tax-related expense.

Generally, you can't claim the cost of travel between home and work under any of the methods, even if you live a long way from your usual workplace or work outside normal business hours. This is private travel.

You also can't claim a deduction for car expenses that have been salary sacrificed or where you have been reimbursed for these expenses.

You can calculate your car expenses in two ways

Claiming expenses without records to back them up is a common mistake car owners make. The ATO allows you to claim up to 5000km of work-related travel at 68c per kilometre however you must be able to provide documentation.

You can choose one of the following two methods to calculate your deduction for car expenses:

• cents per kilometre method
• logbook method

If you claim a work-related car expense using the cents per kilometre or logbook method, you can’t claim any further deductions in the same tax return for the same car.

If you are claiming car expenses for more than one car, you can use different methods for different cars. You can also switch between the two methods for different income years for the same car.

The myDeductions tool in the ATO app can help you keep records of your car use for both of the calculation methods. There are three options for recording your car trips in myDeductions, including:

• a point to point trip
• a GPS trip
• an odometer trip

If you're using the logbook method, you can create a valid digital logbook record using the myDeductions tool.

This is a general summary only. If unsure about car and other vehicle-related tax deductions it’s best to consult a qualified tax accountant or contact the ATO.