Before the twelve weeks are worth starting, two questions have to be answered: is the vehicle a car, and is it yours.
Getting either wrong means twelve weeks of records supporting a claim that cannot be made. Both are worth checking first.
The definition
For these deduction methods, a car is a motor vehicle designed to carry:
- a load of less than one tonne, and
- fewer than nine passengers, including the driver
Source: ATO, motor vehicle and car expenses.
Inside the definition: sedans, hatchbacks, wagons, SUVs, and most utes and vans. Electric vehicles, plug-in hybrids, and conventional hybrids are cars like any other. The propulsion is irrelevant to the definition.
Outside it: motorcycles, and any vehicle designed to carry one tonne or more or nine or more passengers. A dual cab rated at one tonne or above is not a car for this purpose, and neither is a minibus.
Falling outside the definition does not mean no deduction exists. It means the logbook method and the cents per kilometre method do not apply, and the expenses are worked out on a different basis. That is a conversation for a registered tax agent, not a general page.
You have to own or lease it
The second condition is the one that catches more people. To claim car expenses you must own or lease the car, or have it under a hire purchase agreement.
Which means these do not qualify:
A car provided by your employer. If your employer owns the car and lets you use it, it is not your car and its running costs are not your expenses. The fringe benefits tax system deals with employer-provided vehicles, and it is a different regime with different rules.
A novated lease or salary sacrifice arrangement. This is the common case and the surprising one, because the car feels like yours. You chose it, you drive it, the cost comes out of your pay. But under a novated lease, the lease obligations sit with your employer, and the running costs are being met through the arrangement rather than by you personally. You do not own or lease the car in your own right, so you cannot claim its running costs as a work-related car expense.
Being told this plainly is better than finding out after twelve weeks of records. If you are on a novated lease, the logbook method is not available to you for that vehicle, and there is no version of the record-keeping that changes it.
Someone else’s car, usually. There is a real exception here. If you use a car owned by a family member and you can show a private arrangement that made you the owner or lessee, you work out your car expenses as though it is your car, even if the registration was never changed. The ATO’s own example is someone who bought a car from their parents, pays the insurance, fuel and registration, and is the only person who uses it. Registration is evidence, not the test.
What a novated lease driver can still claim
Not nothing. Work-related parking and tolls are separate from car expenses under these methods, and where they are genuinely work-related they can generally still be claimed regardless of how the car is held. Keep the receipts.
If your employer is administering the arrangement, they can tell you what the package already covers, and claiming something twice is worse than not claiming it once.
What is not a car expense
Even when the car qualifies and is yours, some costs sit outside the methods:
- Parking fees and tolls. Not car expenses. Where work-related, they are claimed separately and in full, not at your business-use percentage. Under the cents per kilometre method they are also separate, since the rate is meant to cover running costs rather than these.
- The purchase price of the car. Not deductible as an expense. The vehicle’s decline in value is what enters a logbook method claim.
- The principal portion of a loan repayment. Not deductible. The interest portion is a car expense.
- Modifications, alterations and improvements. Not car expenses, though they can be added to the cost of the car when working out its decline in value.
- Fines. Not deductible. The ATO covers these separately, under parking, tolls, accidents, licence and fines.
Two cars
If you use more than one qualifying car for work, each one needs its own logbook, and where logbooks are kept for two or more cars they have to cover the same period.
Adding a second work car also changes the number of cars you are claiming for, which is one of the conditions attached to carrying an existing logbook forward. See how long a logbook stays valid.
Before you start twelve weeks
Three questions, in order:
- Is the vehicle under one tonne and under nine passengers
- Do you own or lease it in your own name, rather than through your employer or a novated arrangement
- Do you have enough work travel, once the commute is excluded, for the logbook method to beat the capped alternative
The third is what the method calculator is for. The first two are worth settling before you spend a day on it.