What motor vehicle expenses can I claim for my business?

Here’s the deal. Everyone is trying to make the most of their ability to record their personal vehicle use as a business expense, and in response, the ATO is doing their best to minimise the eligible criteria.​

If your vehicle is used solely for business or work purposes, all motor vehicle expenses (e.g. fuel, maintenance, servicing, insurance, registration, replacement tyres, and similar) can be claimed as expenses.​

However, business purposes doesn't include school drop-offs, going to the supermarket, picking up the mail, or even travelling between home and your regular place of work. ​

The only exceptions are where your home is the base of employment, you're carrying bulky tools and equipment, and you're itinerant (i.e. travel from place to place for work rather than a fixed location such as a plumber or electrician whose work location would vary).​

When an employee, sole trader or partnership chooses to use a business vehicle is used privately, the costs need to be separated.​

A logbook records all travel over 12 weeks*. It notes the distance, date and reason for each trip. This information can then be used to understand the proportion of use allocated to the business, and we then apply the percentage of business travel to all vehicle expenses incurred i.e. if it’s 70% of the time, 70% of insurance or a service can be claimed as a business expense.​

Depreciation can also be claimed based on the business use of the vehicle.​

*Assuming your travel habits don’t change significantly, your logbook can be valid for up to five years.​

There’s also some good news about logbooks. You can digitise the whole process with an app to save time. You may want to check out Driversnote or the ATO’s myDeductions app.​

If you don’t intend to keep a logbook, you can claim $0.88 per kilometre for up to 5,000km. You’ll still need to track your business travel, but without as much detail as in a logbook.​

When it comes to companies, motor vehicles that are available for private use are treated differently to sole traders.  If a director, shareholder or employee has a car available to them for private use (whether or not it is used for private purposes), then they are receiving a benefit and it is subject to Fringe Benefits Tax (FBT).  ​

One way to avoid the FBT is to use the FBT Cashout whereby an employee, shareholder or director reimburses the company for this benefit.​

We calculate the reimbursement based on either a logbook or on the vehicle’s GST-inclusive value when it was brought into the company, and the number of days it’s available* for private use. The reimbursement is then recorded as a separate income line in the company’s financial statements (it’s considered income because the company is receiving compensation from the director or shareholder). It's important to note that GST is also payable on the reimbursement.​

*Availability for private use: shareholders reimburse the company for any day that the vehicle is 'available' to them, which includes when the vehicle sits in their driveway. Exceptions to this rule exist where a vehicle serves a specific function, which cannot take passengers (considered an exempt vehicle), and the vehicle has private usage that is minor, infrequent and irregular. ​

The FBT contribution also applies to non-shareholder employees. Their benefit falls under the Fringe Benefits Tax (FBT) regime and is accounted for similarly.​

Yes you can. If you’re a sole trader, you can record the vehicle as a business asset. GST can be claimed on its market value at the time the vehicle is introduced to the business.​

If you operate through a company, the business is able to claim the GST on the business usage of the running expenses of a personal vehicle.​

You can claim 1/11th of the car limit. The car limit for 2025 is $69,674, meaning the maximum GST that can be claimed is $6,334.​

The easiest way is to provide your accountant with the sale and purchase agreement and your financing arrangement, and they'll enter it into your accounting software and make sure it's recorded correctly in your next GST return.​

No, they aren’t. The payments are going towards reducing your loan balance. However, we can claim the interest on the loan for business purposes. We make this adjustment when we prepare your financial statements after year-end.​

If the proceeds from the sale don't go through your Xero-connected bank account, you just need to let your accountant know the sale price and they'll handle it from there.​

It depends. ​

Here’s when we often get the follow-up question: 'What is my best option for tax purposes?'​

That’s one we can’t answer. It’s more of a business decision and it depends on your cash-flow, available finance and personal preferences.​

Beany are accountants for ambitious businesses, delivering big firm expertise without the big cost. We handle everything accounting-related (such as annual compliance, bookkeeping, financial insights and strategy), and help business owners make smarter decisions for their business and lifestyle through our responsive, friendly expertise. Book a call or get in touch to discuss your business and see how we can help.​