Maximising Tax Deductions for Motor Vehicles


Prior to July 1, 2015 there were four methods of calculating and claiming motor vehicle expenses for both individuals and businesses. From July 1, 2016 the 12% of original value method and the one third of actual cost method can no longer be used.

One of the most common and biggest tax deductions is for motor vehicles. The rules applying to claiming for a car are the same for individuals and businesses. Put simply a claim for a motor vehicle is limited to its business use.

The 4 methods for calculating and claiming motor vehicle expenses are:

Each of the different methods applies to traditional passenger vehicles. Different rules apply to more work oriented vehicles. Vehicles designed to carry more than 8 passengers, or a load of 1 tonne or more, can be claimed in full unless they are used for purely private purposes.

Panel vans, taxis, and utes of less than 1 tonne can also be claimed in full where the private use is limited to travel between a persons place of residence and their place of business or where private travel is minor, infrequent and irregular.

The Kilometre Method

Under the kilometre method the tax deduction is calculated by multiplying the business kilometres, up to a maximum of 5000 a year, by a cents per kilometre rate.

No documentation needs to be kept to prove the number of kilometres claimed. You must however be able to show how you estimated the distance traveled in a reasonable way.

The rate varies depending on the engine size of the vehicle. The rates for the 2014/2015 and 2015/2016 years are:

Engine size of car Cents per Kilometre rate
Up to 1600cc 65 cents
1600 cc to 2600cc 76 cents
Over 2600cc 77 cents

These rates apply to conventional cars, for rotary cars and motor bikes other rates apply.

Where two or more cars are owned in a year and used for business purposes a tax deduction can be claimed for each of the cars using this method.

Where a car travelled more than 5000 km a year for business purposes, prior to July 1, 2015, the next two methods could be used.

The 12% of Original Cost Method

Under the 12% of original cost method the tax deduction is equal to the cost of the vehicle, up to the depreciation cost limit which is currently $57,466, multiplied by 12%.

The cost figure used in this calculation is the after GST cost of the car. For example a car that cost $33,000 including GST would produce a tax deduction of $3,600, being $30,000 multiplied by 12%.

The Log Book Method

Under the log book method a record must be kept for 12 weeks of the business kilometres travelled. At the end of that period the business use, as a percentage of the total travel for the car, is what can be claimed of the total running costs of the car.

The log book must show:

In addition the log book must show:

If you want to know how to maximise your tax deduction for motor vehicle costs contact us at TaxBiz Australia.Put simply a claim for a motor vehicle is limited to its business use. The 4 methods for calculating and claiming motor vehicle expenses are:

Each of the different methods applies to traditional passenger vehicles. Different rules apply to more work oriented vehicles. Vehicles designed to carry more than 8 passengers, or a load of 1 tonne or more, can be claimed in full unless they are used for purely private purposes.

Panel vans, taxis, and utes of less than 1 tonne can also be claimed in full where the private use is limited to travel between a persons place of residence and their place of business or where private travel is minor, infrequent and irregular.

If you want to know how to maximise your tax deduction for motor vehicle costs contact us at TaxBiz Australia.