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Claiming a motor vehicle purchase

If you purchase a vehicle to be used in your business, you can raise this as a business expense so that you get the income tax relief. Under ‘Temporary full expensing’ rules’ eligible businesses, including sole traders, can claim an immediate tax deduction (or instant asset write off) for the business portion of the cost of an asset in the year it is first used. By claiming a tax deduction for the whole amount of the vehicle purchase you can reduce your income in your tax return, and therefore, reduce the tax you have to pay.
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Maximum total claimable amount:
If you purchase a car for your business, the tax deduction available under temporary full expensing is limited to $60,733 for the 2021–22 income tax year.

Business v.s. private use

The amount you claim as a tax deduction is determined by how much you use the asset to earn your business income. You need records to show how much you use the vehicle in earning your business income. In order to claim an immediate tax deduction for the business portion of the cost of a car you need to keep a logbook, recording all the kilometres you travel for work, for at least 12 weeks. That amount divided by the total amount you used the car (including for personal use) is what is used to calculate your tax deduction.

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Never think about tax again with HNRY

CarClarity has partnered with HNRY to help Aussie small businesses, contractors and sole traders get peace of mind when it comes to tax.

Simply use promo code CARCLARITY and you can use the HNRY platform fee free for your first $2500 of transactions.

This promotion is only open to new customers who have not used Hnry previously and register using promotional code CARCLARITY. This promotional offer will provide the customer $25 of Hnry credit which will be applied to their account. Once this credit has expired, customers will be subject to the standard Hnry fee of 1% plus GST. You can cancel your account at any time. Usage of the Hnry account is subject to the standard Terms & Conditions found at https://hnry.com.au/au/

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Purchasing a vehicle on finance

If you buy a vehicle on finance, you maybe able to claim a deduction for the purchase price of the vehicle, as per the tax invoice, and not the repayment amounts to the Finance company. You will need to have a copy of the tax invoice to confirm the purchase details of the car being paid off to claim a tax deduction for the car as an asset as per a regular motor vehicle purchase.
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The only difference when paying on finance is that you can also claim the interest charges you incur from the Finance company as a business expense using the same business use percentage that you used when claiming the total cost of the car e.g. 25%.

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Frequently asked questions

How much can I borrow?

Current lenders have capacity to finance commercial vehicles from $5,000 up to $250,000. Individual and business circumstances may affect the maximum loan amount.

Do I need a deposit to take out a business car loan?

No. A deposit is not required for a commercial car loan.

Are all vehicles eligible for the instant asset write off?

Certain types of vehicles are eligible for the Australian Government’s instant asset write off. If eligible, the asset may be written off immediately and a tax deduction claimed for the business portion of the purchase cost. Learn more about the ATO’s instant asset write off.

Can I claim a tax deduction on my business vehicle?

You may be eligible to claim a tax deduction on your business vehicle depending on the vehicle, company structure and vehicle usage. Learn more about claiming a tax deduction for motor vehicle expenses.

Have more questions? Check our FAQ page or talk with our experts.

Things you should know

CarClarity is an online financial comparison service and is owned and operated by CarClarity ACL Pty Ltd ABN 50 606 243 243 / ACN 606 243 243 and Australian Credit License 478 874.
CarClarity provides you access to our expert team who can assist in selecting suitable car loans from our panel of 30+ lenders and over 1000 financial services products. The financial products compared on this website do not necessarily compare all features that may be relevant to you and CarClarity does not compare all rates in market.
All applications are subject to the credit provider’s credit assessment and loan eligibility criteria. Terms, conditions, fees and charges apply. Information provided is factual information only, and is not intended to imply any recommendation about any financial product(s) or constitute tax advice. If you require financial or tax advice you should consult a licensed financial or tax adviser. CarClarity may receive a commission from lenders we recommend.

Instant asset write-off 2022