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  • Car expenses

    You may be able to claim a deduction for motor vehicle expenses, if you use the vehicle in performing your work-related duties. How you work out your deduction will depend on if you are using:

    • a car your own, lease or hire (under a hire-purchase arrangement)
    • someone else's car
    • a motor vehicle, that is not defined as a car.

    If your travel is partly private, you can claim only the work-related portion of the motor vehicle expenses you incur.

    You can use the myDeductions tool in the ATO app to keep track of your expenses and receipts throughout the year.

    For a summary of this content in poster format, see Car expenses (PDF, 598KB)This link will download a file.

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    Definition car vs other motor vehicles

    Cars are motor vehicles (excluding motorcycles and similar vehicles) that carry loads less than one tonne and less than nine passengers. Many four-wheel drive vehicles are included in this definition.

    Car expenses are calculated using either the Cents per kilometre method or the logbook method. You can't use these methods to claim expenses for other vehicles. For other vehicles, you claim the actual costs related to your work use of the vehicle.

    Other vehicles include motorcycles, scooters and similar vehicles as well as vehicles with:

    • greater than one tonne carrying capacity such as utes, trucks, heavy vehicles
    • a carrying capacity for nine or more passengers.

    Car expenses you can't claim

    Generally, you can't claim the cost of car expenses you incur for travel between your home and your regular place of work (the normal or usual place where you start and finish your work duties). You incur these car expenses to put you in the position to earn your income and the travel is private. This is even if you live a long way from your regular place of work or you work outside normal business hours.

    In limited circumstances, there are some situations where car expenses you incur for travel between home and work is deductible.

    You can't claim a deduction for car expenses that:

    • you pay for under a salary sacrifice or novated lease arrangement
    • your employer reimburses you for.

    Cars you use under a salary sacrifice or novated lease arrangement are usually on lease by your employer from a financing company. As you don't own or lease the car yourself under these arrangements, you will not be entitled to claim any deductions for using the car.

    Car expenses you can claim

    You can claim a deduction for work-related car expenses if you use your own car to:

    • perform your work duties, for example, if you travel from your regular place of work to meet with a client.
    • attend work-related conferences or meetings away from your regular place of work
    • deliver items or collect supplies
    • travel between two separate places of employment, but not if one of the places is your home (for example, when you have a second job)
    • travel from your regular place of work to an alternative place of work (that isn't a regular place of work) and back to your regular place of work or home
    • travel from your regular place of work or your home to an alternative place of work that is not a regular place of work – for example, a client’s premises

    Travel between home and work

    In limited circumstances, you can claim the cost of trips between home and your regular place of work, where:

    • your home was a base of employment – that is, you employer requires you to start your work at home and later travel to a workplace to continue work
    • you had shifting places of employment (itinerant work) – that is, you have no fixed place of work and you continually travel from one work site to another
    • you carry bulky tools or equipment for work and all of the following apply     
      • the tools or equipment are essential to perform your employment duties and you don't carry them merely as a matter of choice
      • the tools or equipment are bulky – meaning that because of their size and weight they are awkward to transport and can only be transported conveniently by the use of a motor vehicle
      • there is no secure storage for such items at the workplace.

    You must include any allowance you receive from your employer for car expenses, as assessable income in your tax return. The amount of the allowance is usually shown on your income statement or payment summary.

    Using someone else's car or other vehicle

    If you use someone else's car or other motor vehicle (that is not defined as a car) for work purposes, you can't claim a deduction for expenses using the cents per kilometre method or the log book method. However, you can claim a deduction for actual costs you incur that relate to your work use of someone else's car or motor vehicle.

    Cars someone else owns or leases may include a spouse, family member or employer. If you can show there is a family or private arrangement that made you the owner or lessee (even if you aren't the registered owner) of the car, you can work out your car expenses using either the logbook or cents per kilometre method.

    When working out your claim, you need to work out the actual costs that relate to your work-related travel in the vehicle. You need to keep records of all your expenses (such as fuel) to prove your claims, as well as records that show how you have calculated your work travel as a percentage of your overall travel.

    While it is not a requirement to keep a logbook, it is the easiest way to show how you have calculated your work-related use of the vehicle. You can use the myDeductions tool in the ATO app to help keep your records.

    You can't claim your deduction for motorcycles and other vehicles (that are not cars), under work-related car expenses in your tax return. You need to claim your deduction for these vehicles as a work-related travel expense.

    Example: actual work-related expenses for a motorcycle

    Samid buys a motorcycle that he uses for his work making local deliveries. Samid also uses his motorcycle when he is not working so he decides to keep a logbook to determine his work-related use.

    Samid's logbook shows he travelled a total of 3,000 km on his motorcycle for the whole income year and during the 12-week period he kept his logbook, he travelled 800 km in total with 600 km being work-related travel. By dividing his total work-related kilometres by his total kilometres for the 12-week period, Samid calculates his work use percentage as 75% (600 ÷ 800).

    Samid keeps receipts for his expenses. These were for:

    Fuel and oil

    $560

    Repair

    $400

    Registration

    $540

    Compulsory Third Party insurance

    $300

    Decline in value

    $1,800

    Total

    $3,600

    Samid multiplies his work use percentage by the total expense to get his deduction of $2,700 ($3,600 × 75%).

    End of example

    See also:

    Calculating your car expense deductions

    You use one of the following two methods to calculate deductions for car expenses:

    If you are claiming car expenses for more than one car, you can choose to use a different method to work out your expenses for each car. You can also change the method you use in different income years for the same car.

    The myDeductions tool can help you keep records of your car use for both of the calculation methods. There are three options for recording your car trips in myDeductions, including:

    • a point to point trip
    • a GPS trip
    • an odometer trip.

    If you're using the logbook method, you can create a valid logbook record using myDeductions.

    Cents per kilometre method

    Under the cents per kilometre method:

    • A single rate is used, the rate is:  
      • 72 cents per kilometre from 1 July 2020 for the 2020–21 income year
      • 68 cents per kilometre for 2018–19 and 2019–20
      • 66 cents per kilometre for the 2017–18, 2016–17 and 2015–16.
    • You can claim a maximum of 5,000 business kilometres per car.
    • To calculate your deduction you multiply the number of business kilometres the car travelled in the income year by the appropriate rate per kilometre for that income year.
    • You may need to provide written evidence to show how you worked out your business kilometres (for example, by producing diary records of work-related trips or using the ATO app to track your work trips).
    • Where you and another joint owner use the car for separate income-producing purposes, you can each claim up to a maximum of 5,000 business kilometres.

    The rate incorporates decline in value, registration, insurance, maintenance, repairs and fuel costs. You can’t add these expenses on top of the rate when you work out your deduction.

    Example: car deduction using cents per kilometre

    Once per week, Johan makes a 27km round trip in his own car travelling from head office in the city to meet with clients. In addition, he makes a 106km round trip to visit clients at another location, once a month.

    When Johan consults his diary at the end of the 2020–21 income year, he works out he was at work for 47 weeks, but he missed one weekly meeting with clients as he was sick. He also determines that, although he was on leave for five weeks during the income year, he still made 12 × 106km round trips to visit clients.

    He works out his business kilometres as:

    Number of weekly trips × Distance of weekly trip = Total weekly trip kilometres

    46 × 27km = 1,242 km

    Number of monthly trips × Distance of monthly trip = Total monthly trip kilometres

    12 × 106 = 1,272 km

    Total weekly trip kilometres + Total monthly trip kilometres = Total monthly trip kilometres

    1,242 + 1,272 = 2,514 km

    Johan works out his deduction for the 2020–21 income year as:

    2,514 km × 72 cents = $1,810

    End of example

    Logbook method

    Under the logbook method:

    • Your claim is based on the work-related portion of your actual expenses for the car.
    • Expenses include running costs and decline in value but not capital costs, such as    
      • the purchase price of your car
      • the principal on any money borrowed to buy it
      • any improvement costs (for example, adding paint protection or tinted windows).
    • To work out your work-related use, you need a valid logbook and the odometer readings for the start and end of the logbook period. The logbook period needs to show a minimum continuous period of 12 weeks.
    • You can claim fuel and oil costs based on either your    
      • actual receipts
      • estimate of 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.

    In addition to a valid logbook, you must keep odometer records for the whole period you owned or leased the car during the income year. For example, if you owned the car for the whole income year, you must record the odometer reading on 1 July and on 30 June.

    You must retain your logbook and odometer records until the end of the latest income year in which you rely on them to support your claim and then for another five years after that.

    Keeping a logbook

    Your logbook must cover at a minimum 12 continuous weeks. If you started using your car for work-related purposes less than 12 weeks before the end of the year, you can extend the 12-week period into the next income year.

    Your logbook is valid for five years. However, if your circumstances change (for example, if you change jobs or move to a new house), and the logbook is no longer representative of your work-related use, you will need to complete a new 12-week logbook.

    If you are using the logbook method for two or more cars, keep a logbook for each car and make sure they cover the same period.

    You can keep an electronic logbook by using the myDeductions tool in the ATO app or keep a paper logbook.

    Your work-related percentage is calculated by:

    • Calculating the total number of kilometres you travelled during the logbook period (a)
    • Calculating the number of kilometres you travelled for allowable work-related trips during the logbook period (b)
    • Dividing the amount at (b) by the amount (a) then multiply this figure by 100.

    Once you've calculated your work-related percentage, multiply it by your car expenses to calculate your claim.

    See also:

    Damage to a third-party motor vehicle

    If you use your own motor vehicle in the course of your employment and you're involved in an accident that causes damage to another vehicle, you may be able to claim a deduction for:

    • the costs you incur to repair your vehicle
    • damages or compensation for the damage to the other vehicle if you are liable

    If an accident occurs in the course of your employment, the expenses relating to your liability to pay for the damage to the other vehicle in the accident are costs you incur in earning your employment income. They are not capital, private or domestic.

    See also:

    Last modified: 31 May 2021QC 31951