Car expenses you can claim at tax time

Ah, tax time.

For some, it’s an annual inconvenience. For others, the thought of rummaging through a shoebox full of scrappy receipts in early July gets them brimming with excitement.

Car expenses are a grey area when it comes to tax deductions. What you can claim depends on your line of work, your vehicle and your type of employment.

For instance, a construction worker who drives a light truck can claim things an office worker in a small runabout cannot. Just like a business owner or self-employed contractor will have different opportunities to claim compared with a PAYG employee. 

What car expenses can I claim?

In a nutshell, Australian taxpayers can claim for car expenses if they use their vehicle to:

• Perform work duties
• Attend work-related conferences or meetings away from their normal workplace
• Travel directly between two places of employment (and neither place is their home)
• Travel from home to an alternative workplace, then to their normal workplace

In ‘limited circumstances’, taxpayers can also claim the cost of trips between work and home, where:

• They had shifting places of employment (i.e. regularly working at more than one site each day before returning home)
• They carry bulky tools or equipment to work that are essential to perform duties and cannot be held in secure storage.

The bottom line is that if you use your vehicle for work-related journeys – other than simply to and from work (with some caveats) – you can claim your car expenses at tax time. 

Here’s our quick guide on things you can claim and what to consider. 

1. Does your vehicle meet the definition of a car?

Yep, a simple question to start. Is your car indeed a car under the taxation lens? According to the ATO, your car is a car if it carries a load less than one tonne and carries fewer than nine passengers (including driver). A car can be petrol, diesel, electric or hybrid to meet the definition.  

However, motorcycles, heavy vehicles and others are not classified as cars – rather, those vehicles can claim expenses under a separate work-related travel expense category, rather than a work-related car expense. 

2. You must own or lease the car

The ATO stipulates that to claim car expenses, you must own or lease the car, or hire it under a hire-purchase arrangement. 

If you purchased a vehicle through salary sacrifice or a novated leasing arrangement, it is typically your employer who pays for running costs and subsequently claims the deduction – not you. 

That said, individuals can still claim additional expenses, such as parking and tolls associated with work use of the car. 

If you use a car owned by a family member, and you can show there is a private arrangement that made you the owner or lessee of the car (even if you aren't the registered owner), you work out your car expenses as though it is your car. 

If you don't own or lease the car (or don't have a private arrangement that makes you the owner or lessee), you claim your work-related expenses using the approach for a vehicle that isn't yours. 

3. Expenses must be for work-related trips

Generally, individuals cannot claim trips between home and place of work. However, there are always exceptions (see above). 

You can claim for trips between workplaces or to perform your duties, where you have spent the money yourself and weren’t reimbursed. 

If your travel is partly private, you can only claim a deduction for the work-related portion of all your expenses. 

4. What are the different methods of tax deductions on cars?

There are generally two methods of claiming car expenses. 

Cents per kilomtetre method
The first is cents per kilometre. In this instance, an individual can claim a set rate (88 cents per kilometre in 2025) for each business kilometre travelled during a financial year, up to a maximum of 5000km per vehicle, per year.  

The cents per kilometre method accounts for all car expenses, including decline in value, registration, insurance, maintenance, repairs and fuel costs. That means you cannot add these expenses using this method. 

Logbook method
The second method is the logbook method. Here, users claim based on the ‘business use percentage’ of each car expense. It is deemed more suitable for those who cover more than 5000km annually.

The business use percentage of a vehicle is determined by a logbook that must have been kept for at least 12 weeks, and you must buy a new logbook every five years. Through your logbook you can claim all expenses that relate to the operation of the car at your percentage of business use. 

Details must include when the logbook period begins and ends, the car’s odometer reading at the start and end of each period, total kilometres travelled etc. Owners will need to keep all receipts relating to the vehicle, including fuel.  

If the vehicle is electric, you can claim recharging from public stations or show evidence of charging from home. Alternatively, you can use the electric vehicle (EV) home charging rate of 4.2c per kilometre to make a reasonable estimate of your home charging expenses based on your odometer readings. 

5. What are the car deductions you can’t claim at tax time?

A big no-no at tax time is claiming the cost of normal trips between work and home. 

This includes minor tasks you might do going to and from work, such as picking up the mail, or if you travel to work for a security call-out or parent teacher interviews. 

Additionally, if you work overtime and no public transport is available to use to get you home, you still cannot claim deductions for these trips. 

If your travel is partly private, you can only claim a deduction for the work-related portion of your expenses. 

6. You must have spent your own money on the expense

This sounds like an obvious one, but the ATO stipulates that to claim a car expense, you must have spent the money yourself and not been reimbursed. 

That means that if you receive an allowance from your employer for car expenses, you must include it as assessable income in your tax return. The allowance amount is shown on your income statement or payment summary. 

The easiest way to prove you’ve spent the money is to show a record via receipts – a separate ATO stipulation.