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calculating car deductions tax tips from the ATO

If you are a sole trader , you can claim deductions for vehicle expenses. However you can only claim the parts where the car was used for business purposes only.

Some motor vehicle expenses include:

  • Fuel and Oil

  • Repairs and Servicing

  • Interest on a motor vehicle loan

  • lease payments

  • Insurance

  • Registration

If your motor vehicle is a car, you can work out your deductions by using 2 simple methods.

1. Cents per Kilometer method

2. Logbook Method

1. METHOD 1 - Cents per kilometre method

Under the cents per kilometre method:

  • you can claim a maximum of 5,000 business kilometres per car

  • 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

  • you can't make a separate claim for depreciation of the car’s value.

If you use the cents per kilometre method, your claim is based on a set rate for each business kilometre travelled. This rate is set at 66c per kilometre for the 2015–16 year, 2016–17 year and the 2017–18 year. The rate has been increased to 68c per kilometre for the 2018–19 year. The rates are reviewed each year.

To work out how much you can claim, multiply:

  • the total business kilometres you travelled

  • the number of cents per kilometre.

This figure takes into account all your vehicle running expenses.

Example: Cents per kilometre method

Mark travelled 5,000 business kilometres during the 2017–18 income year. Mark worked out he could claim $3,300 for his vehicle expenses.

Calculation : 5,000 km × 66c per km = $3,300

2. Method 2 -Logbook

Logbook calculation

If you use the logbook method you can claim the business-use percentage of each car expense, based on the logbook records of your car’s usage.

You do this by:

  • dividing the distance travelled for business by the total distance. Multiply by 100 to provide the percentage

  • determine your total expenses, including depreciation, for the income year

  • multiply your total expenses by your percentage to find the total amount you can claim.

Logbook records

Under this method you need to:

  • keep a pre-printed logbook (available from stationery suppliers) or make your own logbook

  • have written evidence of your fuel and oil costs, or odometer readings on which your estimates are based

  • have written evidence for all your other expenses.

You can create a logbook and record work-related car trips using the myDeductions tool in the ATO app. If you use and record your trips using myDeductions you don't need to keep paper records as well.

Example: Traveling for work

At the end of the income year, Gavin’s logbook shows he travelled a total of 26,000 kilometres. 16,000 were for business.

To work out the percentage of car travel used for business purposes, Tim made the following calculation: 1,6000 ÷ 26,000 × 100 = 61.5% of travel was for business purposes.

Gavin's total expenses, including depreciation, are $`3,000 for the income year. To work out how much he could claim, Tim completed the following calculation:

$13,000 × 61.5% = $7,995

How long does the log book need to be recorded for?

If this is the first year you have used the logbook method you must keep a logbook during the income tax year for at least 12 continuous weeks. That 12 week period needs to be representative of your travel throughout the year.

If you started to use your car for business purposes less than 12 weeks before the end of the income year, you can continue to keep a logbook into the next year so it covers the required 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.

Using the logbook for two or more cars

If you want to use the logbook method for two or more cars, the logbook for each car must cover the same period. The 12-week period you choose should be representative of the business use of all cars.

What to record in your logbook

Each logbook you keep must contain the following information:

  • when the logbook period begins and ends

  • the car’s odometer readings at the start and end of the logbook period

  • the total number of kilometres the car travelled during the logbook period

  • the business-use percentage for the logbook period

  • the number of kilometres travelled for each journey recorded in the logbook (if you made two or more journeys in a row on the same day, you can record them as a single journey). You will need to record the

  • start and finishing dates of the journey

  • odometer readings at the start and end of the journey

  • kilometres travelled

  • reason for the journey.

  • the odometer readings at the start and end of each income year you use the logbook method.


This information is not to be relied upon without speaking to your accountant, tax agent or financial adviser depending on the advice.

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