Tax Time Car Claims: What Small Businesses Can and Can’t Claim

As the end of financial year approaches, Australian small businesses are preparing to get their tax affairs in order. But when it comes to car-related expenses, many are unsure what’s deductible—and what could trigger a costly audit.

According to Coco Hou, CPA and CEO of Platinum Accounting Australia, car expenses are one of the most commonly misclaimed items on a tax return.

“A lot of people assume they can claim just because they drive for work, but unless the travel meets specific criteria and you have accurate records, it won’t hold up under scrutiny,” Hou explains.

Here’s what small businesses need to know.

Work-Related Travel vs. Private Use

First, it’s critical to understand the difference between private and work-related travel. Commuting from home to your regular workplace—regardless of distance—is considered private and not deductible. This includes fuel, tolls, and parking for the daily commute.

However, travel that occurs as part of your business—such as visiting clients, attending meetings, or picking up supplies—can be claimed.

“Travel that is directly tied to generating income is usually deductible,” Hou says.

Two Ways to Claim: Cents-Per-Kilometre or Logbook

There are two main methods:

• The cents-per-kilometre method allows a claim of up to 5,000 business kilometres per year at a fixed rate (currently 85 cents per kilometre).

• The logbook method lets you claim a percentage of actual expenses based on business use, but it requires detailed records over a continuous 12-week period.

For businesses that use vehicles extensively—such as trades, delivery services, or ride-share operators—the logbook method often results in larger claims.

What About Car Washes and Tolls?

Surprisingly, some incidental costs like car washes, air fresheners, and seat covers can be claimed—but only under the logbook method, and only in proportion to business use. Parking and tolls for business-related travel are deductible, but not for your regular commute.

Hou warns that many small businesses miss out on legitimate claims—or worse, claim items incorrectly.

“Just because you can access your car records doesn’t mean they are tax-compliant records,” she says.

Keep Records—and Get Professional Advice

For small business owners, the key is accurate record-keeping: fuel receipts, service invoices, insurance, and a current logbook if using the logbook method.

Hou’s advice? Don’t guess.

“A short meeting with your accountant could save you hundreds and make sure you stay within the rules.”

As tax time looms, getting your car claims right could make all the difference to your bottom line.

The post Tax Time Car Claims: What Small Businesses Can and Can’t Claim appeared first on Small Business Connections.