Work-related car expenses

Method 1 – Cents per kilometre method

Method 2 – 12% of original value method

Method 3 – One-third of actual expenses method

Method 4 – Logbook method

Method 1 – Cents per kilometre method

If you use this method:

• you do not need written evidence but you may need to be able to show how you worked out your business kilometres
• your claim is based on a set rate for each business kilometre, and
• you are able to claim a maximum of 5,000 business kilometres even if you have travelled more.

For example, if you travelled 5,085 business kilometres and you want to use this method, you can only claim the cost of travelling 5,000 kilometres. You cannot claim for the extra 85 kilometres.

Method 2 – 12% of original value method

If you bought the car, you can claim 12% of the cost of the car. If you leased the car, you can claim 12% of its market value at the time that you first leased it.

• Your car must have (or would have if you had it for the whole financial year) travelled more than 5,000 business kilometres during the financial year.
• The maximum allowable deduction is 12% of the luxury car limit in the year in which you first used or leased the car.

You do not need written evidence if you use this method, but you may need to be able to show how you worked out your business kilometres.

Method 3 – One-third of actual expenses method

This method allows you to claim one-third of each car expense. Car expenses do not include capital costs, such as the initial cost of your car or improvements to your car.

• Your car must have (or would have if you had it for the whole financial year) travelled more than 5,000 business kilometres during the financial year.
• You need written evidence for all car expenses except for fuel and oil costs.
• There are two ways to work out fuel and oil costs. Use your fuel and oil receipts if you have them or keep odometer records and make a reasonable estimate based on those records.

Odometer records need to show the odometer reading of the car at the start and end of the period that you owned or leased the car. They should also show the car's engine capacity, make, model and registration number.

You may also need to show how you worked out your business kilometres and any reasonable estimate you made.

Method 4 – Logbook method

If you use this method your claim is based on the business use percentage of each car expense.

You need to keep:

• a logbook to calculate the business use percentage
• odometer readings for the start and end of the period you owned or leased the car, and
• written evidence for all car expenses, except for fuel and oil costs.

Your logbook is valid for five years. You must have kept a logbook during the first year this method is used. The logbook must cover at least 12 continuous weeks.

For more information regarding the log book method, please see Claiming a deduction for car expenses using the logbook method on the ATO website.

If you started to use your car for business purposes less than 12 weeks before the end of the income year, you are able to continue to keep a logbook into the following income year so that your logbook covers the required 12 weeks. If you want to use the logbook method for two or more cars, the logbook for each car must cover the same period.

If your claim relates to the 2011-12 income year and you have not kept a logbook since 2006-07, you must have kept a new logbook for 2011-12. If you did not keep a new logbook for 2011-12 you cannot use the logbook method.

If your claim relates to the 2010-11 income year and you have not kept a logbook since 2005-06, you must have kept a new logbook for 2010-11. If you did not keep a new logbook for 2010-11, you cannot use the logbook method.

Your logbook must contain the following information:

• when the logbook period begins and ends
• the car’s odometer readings at the start and end of the logbook period
• the total number of kilometres that the car travelled during the logbook period
• the number of kilometres travelled for work during the log book period based on journeys recorded in the logbook. If you make two or more in a row on the same day, they can be recorded as a single journey, and
• the business use percentage for the logbook period.

If you are using a logbook from an earlier year that established your business use percentage, you need to keep that logbook and maintain odometer records.

You also need a logbook if the ATO told you in writing to keep one. We do not supply logbooks. Pre-printed logbooks are available from stationery suppliers or you can draw up your own.

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