Understanding Work-related Vehicle Expenses

If you use your vehicle as part of your work, you’ll likely be able to claim a tax deduction for work-related vehicle expenses. We take you through what’s tax deductible (and what isn’t!) and records you’re required to keep when claiming work-related vehicle expenses.

What does the ATO classify as a vehicle?

The ATO includes a range of different transportation assets under the broad category of “vehicle”. Generally speaking, you’ll be able to claim expenses for the work-related usage of the following vehicles:

• Car
• Ute
• Van
• Truck
• Bus
• Motorbike

‍

The ATO groups motor vehicles into two categories:

1. Cars. Defined as a motor vehicle (excluding motorbikes) that carries less than nine passengers and a load of less than one tonne.
2. Other vehicles. Defined as vehicles that are not classified as a car. This broad category fits motorcycles, utes, trucks and other vehicles designed to carry more than nine passengers and more than one tonne.

When can I claim a tax deduction for vehicle travel expenses? 

You can generally claim expenses relating to the ‘business use’ of the vehicle; however, there are a few rules to consider when it comes to the definition of ‘business use’. Driving from your home to your workplace is classed as personal travel by the ATO. The exception to this rule is when you have a home-based business and are driving to another work-related location — in which case, the expenses associated with most of these trips may be tax deductible. 

‍

To qualify as having a home-based business, you need to meet the following criteria:

‍

• It’s evident that you’re trading out of your home. For example, you have a sign out the front for your customers to see. 
• Your work area is specifically used for work purposes and cannot be easily used for private reasons. 
• The work area of your home is utilised entirely (or almost entirely) for business purposes.
• You have regular customer visits.

‍

If you meet the home-based business criteria, you’ll be able to claim most travel expenses from your home to other work-related destinations. 

You’ll likely be able to claim trips related to:

• Deliveries or supply runs
• Visiting a customer’s location for work purposes
• Business consultations with professionals such as your accountant
• Driving from worksite to worksite. 

‍

If you do not meet the criteria for a home-based business, these are some scenarios where you may be able to claim travel expenses:

• Driving from your regular place of work to a different location to perform work (for example, leaving your office or workshop to drive to a customer’s house to perform work). 
• Driving from your home to a location you wouldn’t regularly be working from.
• Performing deliveries or picking up supplies.
• Driving from job site to job site. 
• Travelling to work-related functions or conferences. 

‍

How do I claim vehicle expenses?

The methods available for calculating work-related vehicle expenses depend on your business structure and the type of vehicle. 

‍

Sole trader or partnership

If you trade as a sole trader or partnership, you have three methods to choose from, depending on the type of vehicle. 

1. Cents per kilometre method is available for a car only.
2. Logbook method can be used for cars only.
3. Actual costs method must be used for other vehicles.

‍

Company or trust

For companies and trusts, only one method can be used, regardless of the vehicle type; it’s compulsory to use the actual costs method.

Cents per kilometre

The cents per kilometre method calculates your car-related business expenses by multiplying the number of business kilometres driven by the set rate per kilometre for the financial year. For the 2024-25 financial year, the rate is 88 cents per kilometre. You can claim a maximum of 5,000 business kilometres for each car using this method.

‍

This method simplifies the process by covering all car expenses, including fuel, maintenance, and depreciation, so you cannot claim any additional vehicle expenses.

‍

While you don't need to keep receipts, it's essential to maintain records that demonstrate your ownership of the vehicle and the business purpose of your trips. A diary or logbook can be a practical way to document these details and provide evidence if needed.

Logbook 

The logbook method helps you track your car's business-related use by recording details about your trips. Your logbook should cover at least 12 consecutive weeks, and it should reflect your typical vehicle usage throughout the financial year.

‍

What to record:

• Trip details. Note where you went and why for each business-related trip.
• Odometer readings. Record the odometer readings at the start and end of each journey.
• Distance covered. Calculate the total distance in kilometres for each trip.
• Logbook period. Record the odometer readings at the beginning and end of the 12-week logbook period.

‍

Calculating business use:

1. Add up the total kilometres driven during the logbook period.
2. Identify how many of those kilometres were for business purposes.
3. To find the percentage of business use, divide the business kilometres by the total kilometres and multiply by 100.
4. Calculate your total car expenses for the period you're claiming.
5. Your claimable amount is the business use percentage of your total expenses.

‍

Extra records to keep:

• Receipts for fuel and oil.
• Receipts for other car-related expenses like registration, insurance, services, tyres, etc.
• Details about the car’s purchase price and depreciation.

Actual cost method

The actual cost method allows you to claim motor vehicle expenses based on your actual receipts.

‍

Points to remember:

• Eligible expenses: You can only claim the portion of the vehicle's expenses that relates to business use. If the vehicle is used for both business and personal purposes, you must keep records to calculate the percentage of business use.
• Keep receipts: Keep all receipts and documents to support your claims.
• You can claim a deduction for any depreciation value calculated. If the vehicle is a car, there's a limit on the amount you can use for your depreciation claim.

‍

Looking to purchase another work vehicle? Check out our guide on buying a car through your business.

We’re here to help

At Bonerath & Co., we specialise in helping business owners take care of their accounting. If you’d like more information on work-related vehicle expenses (or anything else to do with accounting!) please reach out to us for a chat. 

‍