Motor Vehicle Expenses For Businesses… The Low Down

Are you left scratching your head when it comes to business motor vehicle deductions?

Ok, well here is the ‘low down’ to help make it ALL a little clearer… the first thing to remember is you can only claim for expenses that are part of the everyday running of your business. Your obligations and the deductions you can claim depend on two things:


  1. the type of vehicle you drive
  2. your business structure


A Car – designed to carry a load of less than one tonne and fewer than nine passengers (many 4WD’s and some utes are classed as cars).

Other Vehicles – including motorcycles, minivans capable of carrying nine or more passengers, utes designed to carry loads of one tonne or more.


Sole Traders & Partnerships

If using a car the cents per kilometre or logbook method is used to calculate motor vehicle expense deductions.

For other vehicles used by Sole Traders or Partnerships your claim must be for actual costs incurred based on receipts.

Companies & Trusts 

Can only claim the actual costs for car or other vehicle expenses that are part of the everyday running of the business. Care should be taken if the vehicle is also available for private use by an employee as fringe benefits tax might apply. If an employee of the company or trust uses their own vehicle for business related purposes you can pay them an allowance or reimbursement of running costs and your business can claim a deduction for the allowance/reimbursement paid.

It’s worth noting:

  • You must apportion vehicle expenses between business & private use, whatever your business structure. Expenses incurred in running a ute are not automatically tax deductible. Only the business portion of use can be claimed.
  • Regardless of the method used to calculate vehicle expense deductions, you must keep records for five years to prove your expenses – tax invoices, rego papers, loan or lease documents, details on how you calculated your claim.
  • If you work out your deduction using the logbook method or actual costs, you can generally claim a deduction for depreciation of the motor vehicle. If you use the cents per kilometre method you cannot make a separate claim for depreciation.

Working out business motor vehicle deductions can be tricky. At Bosco Accounting we can help save you the headache and get your motor vehicle expenses right.