Maximise Your Tax Savings: A Guide to Vehicle-Related Expenses Before 30 June

Vehicle-related expenses remain one of the most commonly claimed tax deductions for Aussies, and it’s an area where the Australian Tax Office (ATO) frequently finds errors.

With 30 June not far away, now is a good time to check whether you have all your paperwork in place.

Common car claim mistakes

If you use your private vehicle for work-related purposes (such as visiting clients or travelling to different work locations), you can claim deductions for your vehicle-related expenses.

However, many taxpayers incorrectly try to claim trips from home to work, overestimate their car trips for work usage, or claim 100 per cent business use when the travel is partly private.

Other common errors include automatically claiming expenses for ineligible vehicles (such as one-tonne utes) and failing to keep proper records.

Vehicle logbook or cents per kilometre?

When claiming vehicle deductions, you have the choice of either calculating your claim using a logbook or the cents per kilometre method.

With the logbook method, you are required to track at least 12 weeks of usage to reflect normal travel patterns to make a valid deduction claim. Odometer readings for the start and end of the claim period are also needed.

You also need to keep receipts or other records of all expenses (such as fuel and oil, registration, insurance and repairs). A record of the purchase price of the car and your calculation for its depreciation in value is also required.

Cents per kilometre method

Under the current rules for this method, you can claim a maximum of 5,000 work-related kilometres per car, with the 2025-26 deduction rate being 88 cents per kilometre.

This rate covers all car expenses, including the depreciation in value, registration, insurance, maintenance, repairs and fuel costs. You are not required to retain receipts.

Some taxpayers make the mistake of adding these expenses on top when calculating their deduction claims, but the ATO will not accept the tax claim.

Electric vehicles (EV) and tax

If your car is electric, instead of keeping receipts for fuel and oil, you must keep receipts for electricity from commercial charging stations, evidence for your electricity charging costs at home and odometer readings for the start and the end of the claim period.

Alternatively, you can use the EV home charging rate of 4.2c per kilometre to make a reasonable estimate of your home charging expenses based on your odometer readings.

If you choose to use this rate, but you also use commercial charging stations, your commercial charging costs are ineligible for a separate deduction.

Novated leases and salary packaging

Salary packaging a novated car lease is still a popular choice for many employees, as eligible vehicles are purchased using pre-tax salary, reducing the amount of income on which tax is paid.

Some leases even allow running costs to be included in your lease payments, potentially making both these costs and the purchase price GST-free (the residual value at the end of the lease is subject to GST and cannot be salary packaged).

One drawback with a novated lease is that you cannot claim a deduction for your running costs, as your employer is deemed the owner of the vehicle during the lease period. You can claim additional expenses (such as parking and tolls) associated with work use of the car.

FBT and novated leases

When you drive a car under a novated lease provided by your employer, the ATO considers it a fringe benefit, so you need to consider the potential tax implications.

As your employer is liable for the Fringe Benefit Tax (FBT), some companies pass this cost on to you by taking it from your pre-tax salary.

Novated leases, however, are eligible for an FBT exemption if the car is an eligible EV and the purchase price is below the luxury car tax threshold for fuel-efficient vehicles.

If you would like more information about preparing your vehicle deductions for 30 June, contact our office today.

Important information – Oracle Advisory Group makes no representation or warranties as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. The information in this document is general information only and is not based on the objectives, financial situation or needs of any particular investor. An investor should, before making any investment decisions, consider the appropriateness of the information in this document, and seek their own professional advice. Past performance is not a reliable indicator of future performance. The information provided in the document is current as the time of publication.