Real estate employees - claiming work-related expenses

Leasing and hire purchase payments

One of the big differences between commercial leasing and hire purchase is in the handling of tax deductions. With hire purchase, instead of claiming the whole monthly payment as a tax deduction as you do with a lease, you claim the depreciation of the motor vehicle and any interest charged.

Hire purchase

Under a commercial hire purchase agreement you do not become owner of the motor vehicle until all monies owed under the arrangement are paid. However, you can still claim a tax deduction for the depreciation on the motor vehicle as well as the interest component of the loan repayments to the extent that the motor vehicle is used for work-related purposes. That is, interest on the loan payments and depreciation up to the luxury car tax or depreciation limit threshold.

Commercial leasing

If you take out a car lease, the lender agrees to rent the vehicle to you for a set period for an agreed amount. If the vehicle is entirely for work purposes and not a luxury car, the lease payments are fully tax deductible but you cannot claim depreciation.

If the vehicle is a luxury car, you can claim a tax deduction for the finance component of the lease payments (interest) but not for the part of the lease payments that represent repayments of principal. You can also claim a deduction for depreciation subject to the luxury car tax threshold.

If you lease a car under a salary sacrifice novated lease arrangement, you cannot claim a deduction for the lease payments as these expenses are incurred by your employer. You also cannot claim depreciation.

If you fill in your own tax return you claim these expenses at D2 Work-related travel expenses.

For more information about claiming expenses for vehicles other than cars, refer to D2 Work-related travel expenses.

Sections within Work-related daily travel expenses you can claim

Last Modified: Thursday, 14 July 2011