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Are you thinking about buying a new work vehicle?
Or are you unsure what expenses you can claim going between work sites?
Do you need to carry tools and equipment in your vehicle?
Whether you are an employee, sub-contractor or have your own building or trades business, you may be eligible to claim motor vehicle expenses on your income tax return. However, there are some important technical details you need to get right before you make your claim.
Work out what type of vehicle you have
The first step in your vehicle claim is to determine if it is a car (as defined by the legislation), or a vehicle that is not a car. This matters because the car expense methods only apply to cars.
These ATO definitions cover the basics:
- Motor vehicle (car): The legislation defines a car as a motor vehicle (excluding motorcycles and similar vehicles) designed to carry a load of less than one tonne and fewer than nine passengers. This includes most sedans, hatchbacks, station wagons and many SUVs and dual cab utes.
- If it’s not a ‘car’ for income tax purposes, different substantiation/deduction rules apply to motor vehicle expenses generally. A ute or similar vehicle is not considered a car under these rules if it is designed to carry a load of one tonne or more, or nine or more passengers.
This is important because cars can use either method below, however where a vehicle is not a car, you generally claim using actual costs (with an apportionment for work vs private use), rather than the car-specific methods.
If your vehicle is classified as a car, choose your claim method
For income tax purposes there are only two methods you can use to claim car expenses (outside certain exceptions):
- Cents per kilometre method
- ‘Logbook’ method (actual costs)
CENTS PER KILOMETRE METHOD – The easy way
If you used the car to travel less than 5,000km for work during the year (or your claim is limited to the first 5,000km), you can make your claim using the ATO rate per kilometre travelled.
Your claim is based on a reasonable estimate of your work kilometres, and you must be able to explain how you worked it out.
These rates are reviewed on an annual basis. The most recent rates are as follows:
Financial Year | Cents per Kilometre |
2025–26 | 88 cents |
2024–25 | 88 cents |
2023–24 | 85 cents |
2022–23 | 78 cents |
2021–22 | 72 cents |
2020–21 | 72 cents |
2019–20 | 68 cents |
You must ensure your claim does not exceed 5,000km per car per year and travel must be directly work-related. There is no need to keep detailed expense receipts, but you MUST be able to justify your kilometres.
Logbook Method – More detailed, often more valuable
If you want to claim a percentage of the actual expenses incurred, you must use the logbook method to substantiate the work-related percentage for a car.
You can claim a percentage of the actual expenses incurred, such as:
- fuel and oil
- licenses and registrations
- insurance
- repairs and servicing
- interest on loans
- depreciation on the purchase of the vehicle (subject to ATO cost limits).
Logbook requirement (for cars): It is a requirement to keep a valid logbook for a minimum continuous period of at least 12 weeks to substantiate the work-related percentage of these expenses.
Generally, records must be kept for five years from the date of lodgements. Logbooks need to be kept until the end of the latest year it is relied upon and then for another five years.
Car depreciation limit (car limit)
The legislation also prescribes a limit on the value of your car for tax depreciation claim purposes.
The most recent limits are as follows:
Financial Year | Car Limit |
2025–26 | $69,674 |
2024–25 | $69,674 |
2023–24 | $68,108 |
2022–23 | $64,741 |
2021–22 | $60,733 |
2020–21 | $59,136 |
If your vehicle is not a car for the purposes of these rules (for example, a one tonne ute), the car limit will not apply.
Who is eligible to claim motor vehicle expenses?
There are different eligibility requirements to claim work travel expenses, depending on whether you are an employee, an independent contractor or a business owner, so it's important choosing the right method for you.
Claiming vehicle expenses as an employee
If you are an employee, travel between your home and your usual workplace is generally considered private and thus not eligible to be claimed as a work expense.
However, home-to-work travel can be deductible in limited situations. For example, where your job creates a practical necessity to use your vehicle to transport bulky tools/equipment, and it’s not safe/practical to leave them at work.
Claiming car expenses as a contractor or business owner
Depending on the structure of your business, there are some considerations to make when claiming on motor vehicles.
- If the car is in your own name: You can usually claim work/business driving using the cents-per-kilometre method or the logbook (actual costs) method (if you keep the required records).
- If the car is owned by your company or trust: You generally don’t use the cents-per-kilometre method as a personal claim. Instead, if the vehicle is provided to you (or staff) and it’s used privately (including home-to-work travel), it can trigger Fringe Benefits Tax (FBT) for the company/trust.
RSM provides expert support to tradies navigating tax claims and vehicle expenses
Motor vehicle claims are one of the most common – and most misunderstood – areas in tax. It is not just about what you spend it is also about:
- how the vehicle is owned
- how it is used
- whether you have the right records to back it up.
If you are about to buy a vehicle or want to make sure you are claiming it properly, or wish to discuss in further detail what you are eligible to claim, please contact your local RSM office today.
