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Is there a standard deduction for car expenses?

is there a standard deduction for car expenses

The quick answer to this question is: no.

Many tax payers use a car as a part of producing income. By the logic of the Income Tax Assessment Act 1997, you can claim a deduction for the work-related expenses of the car. There are two methods to claim this deduction: logbook method or cents per kilometre.

The ‘logbook method’ requires you keep an electronic or pre-printed logbook for 12 consecutive weeks which are representative of your travel throughout the year. You then claim expenses related to the car by the business use percentage supplied from the log book. The log book method is the most comprehensive yet can be a lot of additional work.

Alternatively, and appearing to be easier, is the ‘cents per kilometre method’, where a tax payer simply calculates the number of work-related kilometres travelled and multiply this by a standard rate (66 cents for the 2017/18 year, increasing to 68 cents for the 2018/19 year). However, the maximum number of kilometres you can claim under this method is 5,000km.

Many tax payers take this to mean they can claim an automatic deduction of $3,300 regardless of whether they had travelled over 5,000km for work-related reasons. In addition, you are unable to claim travel between your home and work, so tax payers are unable to beef up their travel kilometres this way.

The ATO is currently focusing on this line of thinking and cracking down on those who are unable to prove work-related trips totalling more than 5,000km a year. Cents per kilometre is a simpler method of recording car expenses, not a standard deduction for all tax payers.

Keeping a diary of work-related trips can provide the ATO with evidence your business kilometres is legitimately over 5,000km, while not being as intensive as making a logbook.

Contact us at Dolman Bateman or Buildersbooks if you are looking for an experienced accountant or Bookkeeper.


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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