• Car expenses

    You will probably use your car for both personal and work-related use. This means you need to apportion any car expenses between personal and work-related use.

    If your spouse or de-facto partner is the owner of the car, the car is considered as a joint asset and you can claim deductions for the car in these circumstances.

    Tracking car expenses

    For income tax, if you are an individual there are two ways of claiming car expenses that satisfy the substantiation rules – either:

    • cents per kilometres travelled
    • keeping a logbook to calculate the amount of car expenses claimed.

    When choosing a method, you:

    • can use our work-related car expenses calculator to work out which method gives you the best result
    • can use different methods for different vehicles
    • can change methods from year to year
    • must keep appropriate records.

    The easiest way to track your car expenses is by using the ATO app's myDeductions tool.

    See also:

    The cents-per-kilometre method

    When using the cents-per-kilometre method (point-to-point), your claim is based on a set rate for each business kilometre. You can claim up to a maximum of 5,000 business kilometres per car. The set rate per business kilometre covers the general running costs of your car including depreciation.

    If you use cents-per-kilometre method, you do not need written evidence to show how many kilometres you have travelled but we may ask you to show how you worked out your business kilometres (for example, by producing diary records of work-related trips).

    Note: If you use the cents per kilometre method, you can't make a separate claim for depreciation of the car’s value.

    The logbook method

    When using the logbook method, you can claim the business-use percentage of car expenses.

    Expenses include running costs, depreciation and interest but not capital costs, such as the purchase price of your car or the principal borrowed to buy it.

    To work out your business-use portion, you need a logbook and the odometer readings for the logbook period – a minimum continuous period of 12 weeks.

    Each logbook you keep is valid for five years, but you may start a new logbook at any time. If you establish your business-use percentage using a logbook from an earlier year, you must keep that logbook and maintain odometer readings in the following years.

    You can claim fuel and oil costs based on either your actual expenditure or you can estimate the expenses based on odometer records that show readings from the start and the end of the period you had the car during the year.

    You need written evidence for all other expenses for the car.

    Find out about:

    See also:

    Example: Personal travel and ride-sourcing

    Gina has a job in the city and signed up to be a ride-sourcing driver to earn extra income.

    Gina turns on her application every morning when she drives to work. Some days she's notified of jobs and collects passengers and drops them off before driving to work. Other days Gina doesn't get any jobs or she rejects them because she doesn't have time.

    On the days Gina doesn't get jobs, she can't count the kilometres travelled as work related even though the app was turned on. The main purpose of the travel is for Gina to get to her main job, which is for a private purpose.

    On days Gina is notified of a job and decides to accept it, her tax related travel starts at the time of accepting a job and finishes at the time her ride-sourcing job is completed. She can only count kilometres travelled as work related when she's driving to collect a passenger and taking them to their destination – these are the kilometres associated with providing the ride-sourcing service and earning income.

    Gina can't count kilometres travelled as work related after dropping the client off and travelling to her main job – she's not travelling between workplaces and the main purpose is travelling to her job, which is private expense.

    Example: Travel for income producing purpose turns into a personal trip

    It's a Saturday night and Gina's heard that ride-sourcing drivers get a lot of work if they're available. She turns on her app when she leaves her house and drives around the city for three hours and then drives home. Because Gina’s only intention of the trip was for producing ride-sourcing income, she can count all the kilometres from leaving her home until she gets home three hours later as work related.

    If at some point during this time she decided that business was slow and instead met up with friends, she can't count any further travel as work related. This is because at that point the purpose of the travel changed from an income producing purpose to a personal trip.

    End of example

    Tolls and parking fees

    You can only claim deductions for tolls if they were incurred while ride-sourcing.

    You can allocate the claim for a toll to driving for a ride-sourcing purpose by using the ATO app or keeping a diary entry to track the charge and allocate it to a specific ride-sourcing service.

    You can only claim a deduction for parking fees if they're incurred while doing ride-sourcing activities.

    GST is payable on tolls passed on to passengers. You are entitled to claim a GST credit for GST included in the price of the toll.

    Example: GST on a toll charge

    John takes a passenger and pays a toll of $2.20 including 20c GST. John can claim a GST credit of 20c.

    With a fare of $22.00 (including $2.00 GST), the passenger pays a total charge of $24.20, including tolls.

    John's GST liability on the fare is $2.20, including 20c relating to the toll.

    His GST liability on the 20c toll is offset by the 20c GST credit.

    End of example

    Purchasing or upgrading a car

    Income tax

    There's an upper limit on the cost you use to work out the depreciation for the business use of your car or station wagon (including four-wheel drives). You use the car limit that applies to the year you first use or lease the car.

    Goods and services tax (GST)

    Generally, if you purchase a car and the price is more than the car limit, the maximum amount of GST credit you can claim is one-eleventh of the car limit amount.

    You can't claim a GST credit for any luxury car tax (LCT) you pay when you purchase a luxury car, regardless of how much you use the car in carrying on your business.

    In general, the value of a car includes the value of any parts, accessories or attachments supplied or imported at the same time as the car.

    Depreciation

    You can only claim depreciation for assets that you own. You need to be able to prove ownership, for example that the car is registered in your name.

    Note: If you use the cents per kilometre method, you can't make a separate claim for depreciation of the car’s value.

    If you lease a car under an operating lease you can claim the lease payments.

    See also:

    Car expenses that can't be claimed

    There are some car expenses that can't be claimed because they're personal expenses or not allowed under the law. This includes things like:

    • the cost of getting and maintaining a driver licence
    • fines, for example speeding or parking fines.

    Example: Claiming parking fees

    While running errands, Gina parks her car and incurs parking fees. As the main purpose of the trip is private she can't claim the parking fees, even if her ride-sourcing app was turned on.

    Gina finishes her errands and decides to find some ride-sourcing work, so she drives to the beach in the hope she picks up a fare in the area. To save on fuel Gina parks the car in the beach parking lot and pays for one hour parking at a cost of $5. Gina sits in the car with the app on and after 30 minutes is notified and accepts a ride-sourcing job. Because the only reason Gina drove to the beach was with the intent of getting ride-sourcing work and earning income, she can claim the $5 parking fee paid as a deduction.

    End of example

    See also:

    Fuel tax credits

    You aren't entitled to claim fuel tax credits.

    Fuel tax credits can only be claimed for eligible fuels and activities. Fuels used in light vehicles travelling on public roads, including for ride-sourcing services, aren't eligible.

    See also:

    Summary for claiming car expenses

    Expenses you may be able to claim include:

    • parking fees
    • road tolls
    • mobile phone costs
    • fees or commission charged by the facilitator
    • other expenses – to the extent that they relate to work-related travel.

    Note: Costs of being compliant as a ride-sourcing driver may be deductible, but only to the extent that they aren't of a private or capital nature.

    Car expenses you can claim under the logbook method include:

    • petrol
    • depreciation of your car
    • general vehicle running costs such as
      • insurance
      • car registration
      • repairs
    • maintenance.

    Expenses you can't claim include:

    • fines, such as parking and speeding fines
    • fuel tax credits
    • the cost of getting and maintaining a standard driving licence
    • costs of a capital nature, such as car purchase price
    • personal or private expenses, such as the private use of a car used for ride-sourcing activities.

    Small business entity concessions

    You may be eligible for a range of concessions, such as simpler depreciation – instant asset write-off.

    To work out if you are eligible for small business entity concessions, you first need to work out if you are a small business entity in an income year. You must review your eligibility each year.

    See also:

    Last modified: 14 Sep 2017QC 52951