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  • Actual costs method

    The actual costs methods must be used by:

    • companies and trusts
    • sole traders or partnerships for other vehicles.

    Actual costs are based on receipts for all business-related motor vehicle expenses.

    You can only claim the percentage of the actual costs that relate to business use of the vehicle. Therefore, if a vehicle is used for both business and private purposes, you must keep records that allow you to work out the business-use percentage.

    If you are providing a vehicle to an employee, or shareholder or their associate (such as a spouse), there can be tax implications – see Motor vehicles used by shareholders of private companies.

    Depreciation of the motor vehicle

    If you work out your deduction for expenses using the actual costs method, then you can generally claim a deduction for capital expenses, such as the purchase price of a motor vehicle, over a period of time. This is known as depreciation or a decline in value.

    You may be eligible for an immediate deduction or an accelerated rate of depreciation under one of the tax depreciation incentives (such as temporary full expensing) – see Interaction of tax depreciation incentives.

    If the business vehicle is a car, there’s a limit on the amount you can use to work out your depreciation claim – see Car cost limit for depreciation.

    See also:

    Things to remember:

    Last modified: 16 Jul 2021QC 59372