Tax dos and don’ts for your car claims this EOFY

While most of us use our cars for work in some capacity, there are clear dos and don’ts regarding what you can claim at tax time. The dos can help you get some money back, while the don’ts could land you in hot water with the ATO.

Ladies Finance Club founder Molly Benjamin tells carsales some of the most common mistakes (AKA the don’ts) people make when claiming car expenses at tax time.

“You can’t claim your regular commute, even if you work long hours or carry some tools,” says Benjamin.

“Only trips between work sites or for work-related tasks count.”

However, Benjamin says that you can claim a deduction for trips between home and work if you need to carry bulky tools or equipment and all the following apply:

Unfortunately, you’ve got to do the paperwork!

“If you don’t have a logbook or notes showing where you went and why, the ATO might deny your claim. It’s important to track KMs and keep receipts if needed,” Benjamin says.

Again, if you’ve got the “she’ll be right” attitude when it comes to keeping records, you may find she won't be.

“Some people guess or round up their kilometres, which used to be okay in previous years, but now the ATO wants accurate numbers,” says Benjamin.

“You need to be able to back it up with a logbook or diary.”

While it would be nice, Benjamin says, trying to claim your car is only used for work when it’s not, can get you into strife.

“You can only claim the work-related portion. If you use the car for both business and personal stuff, you have to split the costs,” she says.

When it comes to claiming unclaimable car-related expenses on tax, Ladies Finance Club Ambassador and accountant Diana Todd has seen it all, and has shared some of the most common issues with us.

“The first [misconception] is from tradies who think that buying a 1-tonne Ute makes it automatically 100 per cent tax deductible, including all running costs,” she says.

“But under ATO rules, these Utes often aren’t classified as "workhorse" vehicles. Full deductions only apply if the vehicle carries more than one tonne, and even then, you need to track expenses properly with receipts and a logbook - you can’t just claim based on kilometres.”

“The second is that if you stick your business logo on the side of your car, suddenly, all the vehicle expenses become fully deductible. That used to be a thing, maybe 30 or 40 years ago, but not anymore,” says Todd.

“These days, the only time slapping a business logo on something makes it fully deductible is if it’s clothing, turning it into a uniform.”

“The third is people buying luxury cars like $150,000 European models and thinking they can claim the full cost just because it’s used for work,” says Todd.

But Todd says that the ATO has a car limit for vehicles under one tonne that carry fewer than 9 passengers. For 2024–25, the cap is $69,674 (including GST), and that’s before applying your business-use percentage.

“So, if you only use the car partly for work, your claim is even lower. The rest of the cost isn’t deductible and just stays on your balance sheet,” she says.

Benjamin says that as long as there is a valid logbook that has been kept for 12 continuous weeks to work out the business-use percentage, then you claim the business percentage of:

“One thing most people don’t realise is that you must keep receipts for all expenses,” she says.

“Otherwise, if you are an employee or a sole trader, you can claim up to 5,000 km per car per year at a fixed rate of $0.88 per km for the 2024-25 tax year. For this, there is no need to keep fuel receipts, but you must be able to show how you calculated the kilometres.”

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