Claiming a tax deduction for motor vehicle expenses – small business

As a business owner, you can claim a tax deduction for expenses for motor vehicles used in running your business.

Types of Vehicles and Claimable Expenses for Tax Purposes

Definition of Cars for Income Tax Purposes:

• Cars: Motor vehicles (including 4-wheel drives) designed to carry both:
  • A load less than one tonne
  • Fewer than 9 passengers

Other Vehicles:

• Motorcycles
• Vehicles designed to carry either:
  • One tonne or more (e.g., utility truck or panel van)
  • 9 passengers or more (e.g., minivan)

Ownership: The motor vehicle must be owned, leased, or under a hire-purchase agreement. Businesses structured as a company or trust can also claim for motor vehicles provided to an employee or their associate as part of their employment.

Claimable Expenses:

• Fuel and oil
• Repairs and servicing
• Interest on a motor vehicle loan
• Lease payments
• Insurance cover premiums
• Registration
• Depreciation (decline in value)

Calculation Method: Ensure you use the correct calculation method when claiming motor vehicle expenses. Incorrect methods can lead to erroneous claims. Refer to “Calculation methods for claiming business motor vehicle expenses” for guidance.

Separating Private from Business Use:

• Accurately identify and justify the percentage of motor vehicle use that is for business purposes. The private use portion is non-claimable, and fringe benefits tax may apply.
• Records: Keep a logbook or diary to record private versus business travel. For details, see “Motor vehicle expense records you need to keep”.
• Travel between home and your place of business is generally considered private use, unless you are a home-based business and the trip is for business purposes. Refer to “Motor vehicle expenses for a home-based business” for more information.

Car Limit: There is a limit on the cost used to calculate the depreciation of passenger vehicles (except motorcycles or similar vehicles) designed to carry a load of less than one tonne and fewer than 9 passengers.

For more information contact our office on (03)9848 5933.

Source: www.ato.gov.au