Coco Hou: Tax time car claims - surprising things you can claim and definitely can’t

Tax time:  What car expenses can you claim? Some might surprise you

With tax time approaching, many Australians are unsure about what vehicle expenses they can claim and what they absolutely cannot. According to Coco Hou CPA and CEO of Platinum Accounting Australia, there are a number of eligible car-related deductions, but strict rules apply. Understanding those rules can mean the difference between a maximised return and a costly audit.

"Car expenses are one of the most commonly misclaimed items on a tax return," Hou explained.

"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."

Coco Hou CPA outlines important rules regarding vehicle deductions. 

The difference between private and work-related travel

One of the most important distinctions to understand is between private travel and work-related travel. 

"Driving from home to your regular workplace is considered private, and is not deductible, no matter how far you travel or how often you drive. This includes tolls, parking and fuel costs related to the commute," Hou said. 

"However, travel that occurs as part of your job, such as driving between worksites, attending client meetings, collecting supplies or transporting equipment, is considered work-related. Those kilometres and related costs may be eligible for deduction."

How to claim: cents-per-kilometre vs logbook method

There are two main ways to claim car expenses: the cents-per-kilometre method and the logbook method.

"The cents-per-kilometre method allows you to claim up to 5,000 business kilometres per year at a set rate, currently 85 cents per kilometre. This rate includes fuel, servicing, registration, insurance and depreciation, so those cannot be claimed separately," Hou said. 

"For people who do a significant amount of work-related driving, the logbook method is often more beneficial. It allows you to claim a percentage of actual car expenses based on your documented business use." 

Hou emphasised that a logbook must be maintained for a continuous 12-week period and updated if your usage pattern changes. Once established, that percentage can be applied to running costs such as petrol, oil, insurance, servicing, repairs, registration, loan interest and depreciation.

What about car washes, scents and cosmetic upkeep?

Hou said many people are surprised to learn that car washes, detailing and even things like car air fresheners, sunshades, tissue boxes and car seat covers can be claimed but only under the logbook method and only in proportion to business use.

For example, if you frequently drive clients or colleagues to meetings and want to keep the car clean and presentable, you may be able to claim a portion of those costs. However, this must be documented and clearly tied to your work-related activities.

"If you buy a car scent or get the car cleaned to make a good impression on a client you are driving to a meeting, that's potentially deductible," Hou said.

"But if you just want your car to smell nice for personal reasons, that's not a business expense."

Parking, tolls and garaging: what you need to know

The same logic applies to parking and tolls. You cannot claim parking at your regular place of work, but you can claim parking or tolls incurred while travelling to client meetings or other work-related destinations. If you use a toll road or pay for parking while heading to a job site, those receipts should be kept.

It is also a common myth that garaging your car at home can be claimed. Hou is clear that garaging is considered a private cost unless your home is the base of your business and the car is essential to your work operations.

What if your car is leased or financed?

Even people with leased or financed cars are not excluded. If using the logbook method, the interest portion of your lease or loan repayments can be claimed in proportion to business use. Again, documentation is key.

Ride-share drivers, small business owners and tradespeople who rely on their vehicles to generate income may be eligible for more extensive deductions, but they must still follow the same record-keeping requirements. This includes maintaining fuel receipts, service invoices, insurance documents and a current logbook if using the actual expenses method.

"Just because you can access your car records doesn't mean they are tax-compliant records," Hou said.

"You need to actively track your use and expenses, not just make assumptions or round figures. The ATO is very specific about this."

Coco Hou's final advice: speak to your accountant

While the tax rules around vehicles can seem complex, Hou said the best course of action is to keep detailed records and speak to a qualified tax advisor before lodging your return.

"A lot of people miss legitimate deductions simply because they're not aware of them, or worse, they claim things they shouldn't and get caught out," she said.

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

About Platinum Accounting Australia

Platinum Accounting Australia is a leading national accounting firm that has been operating in Australia since 2008.  With a national footprint, the business offers a broad range of services for individuals and businesses of all sizes including tax planning, accounting, advisory and bookkeeping.   Platinum Accounting Australia also offers a highly popular and growing licensee program for bookkeepers and accountants to assist them to grow as part of a respected national network. 

www.platinumaccg.com.au