How to Claim Car Related Tax Deductions

If you use a car for business purposes, you could be missing out on valuable tax savings by not claiming your car expenses. Understanding how to claim these deductions properly can help reduce your taxable income and improve cash flow. Here’s a breakdown of why and how you should claim car expenses:

Why Claiming Car Expenses Matters

  • Maximises Your Tax Savings: Claiming car expenses ensures youโ€™re not paying more tax than necessary.
  • Accurate Expense Tracking: By tracking and claiming expenses, you gain a clearer picture of your business costs.
  • Legal Compliance: Properly documenting car use ensures you stay compliant with ATO requirements.

What Can You Claim?

If your car is used for business, you may be able to claim:

  1. Fuel Costs: The petrol you purchase for work-related travel.
  2. Maintenance and Repairs: Servicing, tyre replacements, and any necessary repairs.
  3. Insurance and Registration: A portion of these costs can be claimed if the car is partially or fully used for business.
  4. Depreciation: The decline in your carโ€™s value over time.
  5. Loan Interest or Lease Payments: For vehicles purchased or leased for business use.

Methods for Claiming Car Expenses

The ATO allows two main methods to calculate your car expense deductions:

  1. Cents Per Kilometre Method:
    • Claim a set rate (e.g., 85 cents per kilometre for 2024โ€“2025).
    • Suitable for simpler claims with less frequent car use.
    • Keep a logbook of business trips, including dates, destinations, and kilometres.
  2. Logbook Method:
    • Calculate deductions based on the percentage of business use.
    • Requires a 12-week logbook recording all trips to determine business vs personal use.
    • Ideal for those who use their car extensively for business.

Example: Claiming Car Expenses

Scenario 1:
Sarah owns a small catering business and drives her car to pick up supplies, deliver meals, and meet clients. Over a year, her logbook shows that 60% of her car usage is for business purposes. She claims 60% of her fuel, maintenance, and insurance costs, saving thousands at tax time.

Scenario 2:
Michael, a graphic designer, drives occasionally to meet clients. He tracks his kilometres using the cents-per-kilometre method and claims $850 for 1,000 km of business travel.


Tips for Claiming Car Expenses

  • Keep Detailed Records: Whether you use the cents-per-kilometre or logbook method, accurate records are essential.
  • Use Apps for Tracking: Apps like MileIQ or ATOโ€™s MyDeductions app simplify logbook recording.
  • Avoid Overclaiming: Only claim expenses directly related to business use.
  • Get Professional Advice: An accountant can guide you on whatโ€™s claimable and ensure you meet ATO compliance.

Drive Your Tax Savings Further!

Donโ€™t leave money on the table claiming car expenses can significantly reduce your tax burden and boost your business finances.

Need help claiming car expenses? Contact Tax Accounting Adelaide today for expert advice tailored to your needs. Let us help you maximise your deductions!