Can I Write Off My Car on Tax? (Australia 2026)

Thinking about writing off your car expenses can feel complicated, but the basic idea is simple: you can only claim deductions for the percentage of your car use that is for **work purposes**. Simply driving to work and back (commuting) does not count. You must be using the car to earn income, such as visiting a client, picking up supplies, or attending a job site. Before you start, keep all your receipts, including fuel purchases, service invoices, and toll charges. These are your proof! We recommend bookmarking our full guide to deductible work expenses to make sure you don't miss anything. When calculating your potential tax savings, remember that the deduction reduces your taxable income, meaning you pay less tax overall. For example, a $5,000 deduction could save you over $1,000 in tax, depending on your marginal rate.

If you don't want the hassle of keeping a detailed logbook, the 'cents per kilometre' method is a great option. This method simplifies things immensely because you don't need to track every single kilometre. For the 2026 tax year, the ATO allows a deduction of 85c per kilometre. However, this deduction is capped at a maximum of 5,000 kilometres. This means the absolute maximum deduction you can claim using this method is $4,250. This is perfect if your work driving is relatively consistent and low mileage. You simply multiply the kilometres you estimate were used for work by 85c, up to that $4,250 limit. This method is quick, requires no logbook, and is ideal for casual or low-mileage workers.

If you drive a lot for work, the logbook method is usually the most financially rewarding way to claim. This method requires you to track your car's usage for a period—ideally 12 weeks—to determine the exact percentage of your driving that is work-related. Once you have that percentage (e.g., 75%), you can then apply that percentage to *all* your car's running costs. This includes fuel, insurance, registration, servicing, and even depreciation. The more running costs you have, the higher your potential deduction. While it takes more effort, it allows you to claim a much larger deduction than the capped cents-per-kilometre method. If you are unsure how to calculate your business percentage, check out our online tax calculator to see the difference!

Keep an eye out for other ways to reduce your tax bill. For small businesses, the government often provides an instant asset write-off, which allows you to claim the cost of new assets, like a car, in a single year. For 2026, this threshold was set at $20,000. If your car cost falls under this limit, it can be a major boost to your deductions. Another alternative to owning a car is considering a **novated lease**. This is a salary packaging arrangement where your employer pays for the car, and the costs are deducted pre-tax, which can be a significant benefit. Always compare the total cost of ownership against the tax benefits. For more details on managing your fuel expenses, read our article on optimising fuel costs.

Q: Can I use my personal car if I don't own it?

Answer: Yes, as long as you are paying for the running costs (fuel, insurance, maintenance) and using it for work purposes, you can claim a deduction. You need to prove you are incurring the expense.

Q: What counts as 'work use'?

Answer: Any driving required to perform your job duties, such as visiting a supplier or a client, counts. Commuting between your home and primary workplace does not.

Q: What if I forget to keep receipts?

Answer: It is very difficult to claim expenses without evidence. Always keep a detailed record of your trips, receipts, and invoices to satisfy the ATO.