What Car Expenses Can You Claim on Tax in Australia?

If you use your car for work, the ATO may let you claim a range of car-related expenses on your tax return. But which costs qualify? And how does that change if you’ve got a novated lease?

Let’s break it down so you can drive smarter come tax time.

First things first: Work-related use only

The golden rule: To claim car expenses on tax, the use must be work-related. That means:

• Driving between job sites

• Attending client meetings

• Travelling for work-related training or conferences

• Carrying tools or equipment between locations

Not deductible:

• Driving to and from work (standard commute)

• Weekend road trips

• Personal errands (no, not even Bunnings)

What expenses can you claim?

If you meet the ATO’s criteria for work-related driving, you may be able to claim:

• Fuel and oil

• Registration

• Insurance

• Servicing and repairs

• Depreciation (based on car value)

• Loan interest (if financed)

• Lease payments (if applicable)
  

Sounds like a lot? It is. But here’s where a novated lease simplifies the whole process.

How novated leasing makes tax claims easier

With a novated lease, many of these expenses are salary packaged, meaning they’re bundled together and deducted from your pre-tax income.

So instead of tracking every receipt or keeping a detailed logbook all year, you’re already claiming these costs in real time through payroll. It’s one of the biggest reasons why a novated lease is one of the easiest ways to maximise your car tax benefits, especially if you're a PAYG employee.

Curious what that could look like? Use our novated lease calculator to get a quick savings estimate.

Two ways to claim if you're not using a novated lease

If you’re not salary packaging, you’ve got two options when it comes to claiming car expenses:

1. Cents per kilometre method

• Claim a set rate (currently 85c/km)

• Up to 5,000 km per year

• No receipts needed, but you must show how you calculated the distance

2. Logbook method

• Track work-related travel for 12 weeks

• Keep receipts for all expenses

• Claim the work-related percentage of your total costs

If you’re doing a lot of work driving, the logbook method usually gives you a bigger deduction but it takes more effort.

What if you're leasing an EV?

Even better. Under the Federal Government’s Electric Car Discount, eligible EVs under the LCT threshold are exempt from Fringe Benefits Tax (FBT) when novated.

That means you get:

• Pre-tax salary deductions

• No FBT

• Thousands in potential tax savings

And unlike traditional claims, you don’t need to log kilometres or save receipts. It’s all handled through your lease.

What if you're self-employed?

If you’re a sole trader or contractor, you can still claim many of the same expenses but you’ll need to meet the ATO’s substantiation rules, such as:

• Business use percentage

• Logbook

• Receipts and invoices
  
  

It may be tempting, but you can’t double-dip. If you’re salary packaging the car through a novated lease, you can’t also claim those costs on your tax return.

Recap: Tax-deductible car expenses

Here’s a quick snapshot of what you can potentially claim:

Want to make it easier?

The easiest way to access most of these deductions without managing receipts or spreadsheets is to salary package your car through a novated lease.

Let us handle the admin while you enjoy:

• Lower taxable income

• No out-of-pocket costs for car expenses

• Stress-free budgeting

If you’re using your car for work (even occasionally) there could be tax savings on the table. And if you’re looking for the simplest, most effective way to claim them, a novated lease could be the answer.

Want to see how it stacks up for your salary and car choice? Get in touch today!