Motor Vehicle Use for Tax Purposes in Australia (2024-25 Update)

By Jaye Mankelow
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Motor vehicle expenses are a common tax deduction for individuals and businesses in Australia. The Australian Taxation Office (ATO) provides specific methods for calculating deductions for work-related vehicle use.

However, there are limits on depreciation for certain vehicles and exemptions for others. This article outlines the available claim methods, the updated depreciation limit for 2024-25, and details on vehicles where the limit does not apply.

Methods for Claiming Motor Vehicle Expenses

The ATO allows two primary methods for claiming motor vehicle expenses:

1. Cents per Kilometre Method (Simplest Method)

The cents per kilometre (c/km) method is the simplest way to claim motor vehicle expenses and is suitable for individuals with relatively low work-related car usage.

• From 1 July 2024 (2024-25 income year), the rate is 88 cents per kilometre.
• You can claim up to 5,000 km per year without needing detailed records of actual expenses.
• This rate covers fuel, servicing, registration, insurance, and depreciation.
• A logbook is not required, but you must provide a reasonable estimate of your work-related kilometres, such as diary records or employer confirmation.

This method is best for employees or sole traders who use their car occasionally for work and do not want to track every expense.
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2. Logbook Method (More Accurate for Higher Deductions)

The logbook method allows you to claim a percentage of your actual vehicle expenses based on business use.

• A logbook must be kept for 12 consecutive weeks and updated every five years (or sooner if usage changes significantly).
• The Logbook should include details of each journey:
  • Date of travel
  • Start and finish odometer readings
  • Total kilometres travelled
  • Purpose of the trip (business or personal)
• Expenses that can be claimed include fuel, registration, insurance, servicing, loan interest, lease payments, and depreciation.

This method is ideal for individuals with high work-related car use as it generally results in a higher deduction compared to the c/km method.

Depreciation Limit for Motor Vehicles (2024-25)
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The car depreciation cost limit sets a maximum amount that can be claimed for the decline in value of a car.

For the 2024-25 financial year, the limit is $69,674. This means:

• If you purchase a vehicle costing more than this limit, you can only claim depreciation on up to $69,674, even if the car costs more.
• The depreciation is claimed using the declining balance method or prime cost method, based on ATO depreciation rules.
• This limit also applies to Goods and Services Tax (GST) claims – meaning if you purchase a car above this threshold, your GST claim is also limited to 1/11th of $69,674.

Vehicles Exempt from the Depreciation Limit

The depreciation cost limit does not apply to vehicles that are not considered "cars" under tax law. The limit applies only to passenger vehicles (cars designed to carry fewer than 9 passengers and weighing less than 1 tonne).

Vehicles that are exempt from the depreciation limit include:

• Trucks and vans (e.g., delivery trucks, prime movers, panel vans)
• Buses (designed to carry 9 or more passengers)
• Heavy machinery and work vehicles (e.g., construction equipment, forklifts)
• Utes and other vehicles designed primarily for carrying loads rather than passengers

What About Utes and Dual-Cab Vehicles?

Not all utes are automatically exempt from the depreciation limit. The key factor is whether the vehicle is designed for carrying loads rather than passengers.

• The ATO applies a load-carrying capacity test to determine whether a ute or similar vehicle is considered a "car" for depreciation purposes.
• If the vehicle’s carrying capacity exceeds 1 tonne, it is not subject to the depreciation limit.
• Even if a vehicle is under 1 tonne, it may still be exempt if its primary purpose is to carry goods rather than passengers.

The ATO provides a calculation method to determine whether a vehicle is primarily for carrying loads. This considers:

• The total gross vehicle mass (GVM)
• The tare weight (the vehicle’s empty weight)
• The payload capacity (GVM minus tare weight)
• The proportion of space allocated to passengers vs. cargo

If a ute or dual-cab vehicle is determined to be passenger-focused, the depreciation limit applies. If it is load-focused, the full cost of the vehicle can be depreciated.

For example:

• A Toyota Hilux single-cab with a payload of 1,200 kg would be exempt from the depreciation limit.
• A dual-cab utility with a smaller tray and a 900 kg payload might be subject to the depreciation limit, depending on the calculation outcome.

It is important to check manufacturer specifications and seek professional advice if you are unsure whether your vehicle qualifies.

Choosing the Right Claim Method

For employees who occasionally use their car for work, the cents per kilometre method is the simplest.

For sole traders and businesses with high vehicle use, the logbook method usually provides greater tax benefits.

Key Takeaways (2024-25 Updates)
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✅ The cents per kilometre method rate is 88 cents per km from 1 July 2024.

✅ The 5,000 km limit still applies under this method.

✅ The logbook method requires a 12-week logbook every five years.

✅ The depreciation limit for 2024-25 is $69,674, restricting the maximum claimable depreciation on cars.

✅ Trucks, heavy vehicles, and vehicles primarily designed to carry loads (not passengers) are exempt from the depreciation limit.

✅ The ATO's load-carrying capacity test determines if a ute or similar vehicle is exempt from the limit.

By understanding these rules, individuals and businesses can maximise their motor vehicle tax deductions while ensuring compliance with the ATO’s regulations.

For the latest tax rates and updates, always check the ATO website.


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