Quick Reference: What You Can Claim
| Expense Type | Employee (Work Use) | Sole Trader | Company |
|---|---|---|---|
| Fuel | % work use | % business use | % business use |
| Registration | % work use | % business use | 100% |
| Insurance | % work use | % business use | 100% |
| Servicing/repairs | % work use | % business use | 100% |
| Interest on loan | % work use | % business use | 100% |
| Depreciation | % work use | % business use | 100% |
| Tolls | Specific trips only | % business use | % business use |
Important: "% use" means the percentage genuinely used for income-producing purposes.
Key Takeaways
- You can only claim the business-use portion of vehicle expenses. Personal use (including commuting) isn't deductible.
- Two methods for sole traders: logbook (more paperwork, higher deductions) or cents per km (simpler, capped at 5,000 km).
- Company-owned vehicles can claim 100% of expenses but may trigger Fringe Benefits Tax if used privately.
- Keep records: The ATO audits vehicle claims frequently. No logbook = no deduction (for logbook method).
Who Can Claim Vehicle Deductions?
Employees
You can claim vehicle expenses for:
- Travel between two work locations (not home to work)
- Carrying bulky equipment your employer requires (genuine need, not convenience)
- Travel to client sites, meetings, or alternate workplaces
You cannot claim:
- Commuting from home to your regular workplace
- Private travel (weekends, holidays, personal errands)
- Travel where you have a choice
Sole Traders and Partnerships
You can claim the business-use percentage of vehicle expenses for:
- Travel to client sites, jobs, and meetings
- Business errands (bank, post office, suppliers)
- Travel between business locations
For CQ businesses with long distances between jobs (Rockhampton to Gladstone, site visits to Moranbah), vehicle deductions can be significant.
Companies (Pty Ltd)
The company can claim 100% of vehicle expenses for company-owned vehicles. However:
- If employees (including directors) use the vehicle privately, Fringe Benefits Tax (FBT) applies
- FBT can be substantial—sometimes more than the deductions saved
- Careful structuring is essential
The Two Methods for Claiming (Sole Traders)
Method 1: Logbook Method
How it works: Track your actual vehicle expenses for the year, then apply your business-use percentage (determined by a logbook).
Requirements:
- Keep a logbook for a minimum 12 continuous weeks
- Record every trip: date, odometer start/end, km travelled, purpose
- Logbook is valid for 5 years (unless circumstances change significantly)
- Keep all receipts for fuel, servicing, registration, insurance
What you can claim:
- Fuel and oil
- Registration
- Insurance
- Repairs and servicing
- Interest on car loan
- Depreciation
- Lease payments (instead of depreciation + interest)
Example:
- Total vehicle expenses for year: $15,000
- Logbook shows 75% business use
- Deduction: $15,000 × 75% = $11,250
Best for: High-kilometre users (common in CQ), expensive vehicles, or business use over 50%.
Method 2: Cents Per Kilometre
How it works: Claim a set rate per business kilometre (85 cents for 2024-25), up to 5,000 km maximum.
Requirements:
- Estimate your business kilometres reasonably
- Keep diary notes or records of business travel
- Maximum claim: 5,000 km × 85c = $4,250
Best for: Low-kilometre users (<5,000 business km), those who hate paperwork.
CQ Reality: Most CQ businesses exceed 5,000 business km easily. A single trip from Rockhampton to Mackay and back is 680km. Logbook method usually makes more sense here.
Which Method Should You Use?
| Situation | Best Method | Why |
|---|---|---|
| >5,000 business km | Logbook | Cents per km caps at 5,000 km |
| Expensive vehicle | Logbook | Higher depreciation and running costs |
| High fuel costs | Logbook | Capture actual expenses |
| CQ distances | Logbook | You'll exceed 5,000 km quickly |
| <5,000 business km | Cents per km | Simpler, no receipts needed |
| Hate paperwork | Cents per km | Just estimate km |
Vehicle Depreciation Explained
Depreciation is often the largest vehicle deduction. It reflects the vehicle losing value over time.
Depreciation Basics
- Effective life: Cars are typically depreciated over 8 years
- Method: Diminishing value (higher deductions early) or prime cost (equal deductions each year)
- Cost limit: For cars, there's a maximum depreciable amount ($68,108 for 2024-25)
Depreciation Example (Diminishing Value)
$70,000 ute, 80% business use:
| Year | Opening Value | Depreciation (25%) | Business Portion (80%) |
|---|---|---|---|
| 1 | $68,108* | $17,027 | $13,622 |
| 2 | $51,081 | $12,770 | $10,216 |
| 3 | $38,311 | $9,578 | $7,662 |
| 4 | $28,733 | $7,183 | $5,746 |
*Capped at car cost limit
Instant Asset Write-Off
The instant asset write-off allows eligible businesses to immediately deduct the full cost of assets. Rules change frequently—check with your accountant.
Fringe Benefits Tax (FBT) Warning
If a company-owned vehicle is available for employees' private use, Fringe Benefits Tax applies.
What Triggers FBT?
- The vehicle is garaged at an employee's home
- The employee can use it for private trips
- The employee is a director (director = employee for FBT)
FBT Rate
The FBT rate is currently 47%—the top marginal tax rate.
Example: Why FBT Matters
A company provides an employee with a $70,000 vehicle:
- Taxable value (statutory method): ~$14,000 per year
- FBT payable: $14,000 × 47% = $6,580 per year
This can wipe out the benefit of claiming 100% of expenses through the company.
GST and Vehicle Purchases
Claiming GST on Purchase
If your business is GST-registered:
- Chattel mortgage: Claim full GST upfront
- Hire purchase: Claim GST on each monthly payment
- Lease: Claim GST on each lease payment
GST on Running Costs
Claim GST on:
- Fuel (keep receipts)
- Servicing and repairs
- Toll fees
Cannot claim GST on:
- Registration (no GST included)
- Insurance (GST-free)
- Interest on loans (no GST included)
Record-Keeping Requirements
The ATO is strict about vehicle deductions. Poor records = disallowed claims.
For Logbook Method
Essential records:
- 12-week logbook showing every trip
- Odometer readings at start and end of year
- All receipts for fuel, servicing, insurance, registration
- Loan statements showing interest
- Purchase documents (for depreciation)
Logbook requirements: Each trip must record:
- Date
- Starting and ending odometer
- Kilometres travelled
- Purpose of trip (be specific: "Client meeting at BHP Moranbah" not just "work")
How Long to Keep Records?
- 5 years from when you lodge the return
- Longer if involved in a dispute
Common Mistakes That Trigger Audits
1. Claiming 100% Business Use
Unless the vehicle is genuinely never used for private purposes (rare), claiming 100% raises red flags.
2. No Logbook
Claiming logbook method deductions without a valid logbook will result in disallowed claims.
3. Inconsistent Claims
Claiming high fuel expenses but low kilometres looks suspicious.
4. Round Numbers
Claims like exactly $5,000 suggest estimates rather than records.
Claiming Vehicle Finance Interest
Interest on a car loan used for business purposes is tax-deductible.
Example:
- Annual interest paid: $4,000
- Business use: 80%
- Deductible interest: $4,000 × 80% = $3,200
Practical Tips for CQ Businesses
1. Start Your Logbook Now
12 weeks of accurate records sets your business use percentage for 5 years.
2. Use an App
Logbook apps make recording trips easy. Some use GPS to track automatically—useful for site visits across CQ.
3. Consider Your Actual Distances
CQ distances mean most businesses exceed 5,000km easily:
- Rockhampton to Mackay: 340km one way
- Rockhampton to Gladstone: 110km one way
- Rockhampton to Emerald: 270km one way
Logbook method almost always beats cents per km in Central Queensland.
4. Keep Fuel Receipts
CQ fuel prices fluctuate significantly. Keep receipts to claim actual costs.
Frequently Asked Questions
Can I claim my commute to work?
Generally, no. However, if you work from home predominantly, travel to client sites may be deductible.
Do I need to keep every fuel receipt?
For logbook method: yes. For cents per km: no receipts needed.
What if I use my personal car for work occasionally?
Claim the work portion only using either method.
Is it better to buy or lease for tax purposes?
Depends on your circumstances. Your accountant can model both scenarios.
Ready to Maximise Your Vehicle Deductions?
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This guide is general information only and not tax advice. Tax laws are complex and change frequently. Always consult a registered tax agent or accountant for advice specific to your situation.
