Australia Motor Vehicle Tax Guide
Australian motor vehicle taxation. The guide covers: the car expense deductions (the "car deductions") — the business operators and the employees can claim the deductions for the car expenses if the car is used for the business purposes; the two methods for claiming the car deductions are: (a) the cents per kilometre method (the "cents per km method") — the deduction is calculated at the rate of 85 cents per kilometre (the "cents per km rate" for the 2025-26 year) up to the maximum of 5,000 business kilometres per year; the taxpayer does NOT need the "logbook" for the cents per km method; the taxpayer must be able to "demonstrate the business use" (the "reasonable estimate" of the business kilometres); the cents per km method is available only to the "individuals" (NOT to the companies, the trusts, or the partnerships); (b) the logbook method (the "logbook method") — the deduction is based on the "actual expenses" of the car (the "total car expenses") apportioned by the "business use percentage" (the "business kilometres" divided by the "total kilometres"); the taxpayer must maintain the "logbook" for at least 12 consecutive weeks (the "continuous 12-week period") every 5 years (the "logbook validity period"); the logbook must record: the "date of each journey", the "start and the end time", the "kilometres travelled", the "purpose of the journey"; the car expenses include: (a) the "fuel and the oil", (b) the "registration and the insurance", (c) the "repairs and the maintenance", (d) the "depreciation" (the "decline in value") of the car, (e) the "interest on the car loan", (f) the "lease payments"; the car limit for the depreciation (the "car limit") — the "car limit" for the 2025-26 year is $68,108 (the "car cost limit" for the depreciation purposes); if the cost of the car exceeds the car limit, the depreciation deduction is capped at the car limit (the "luxury car depreciation limit"); the car limit applies to: (a) the "decline in value" (the "depreciation") of the car under the "Division 40" of the "ITAA 1997", (b) the "instant asset write-off" (the "temporary full expensing" — the cost of the car is limited to the car limit for the instant asset write-off); the Luxury Car Tax (the "LCT") — the LCT is imposed on the "luxury cars" (the "luxury cars" — the cars with the "GST-inclusive value" above the "LCT threshold"); the LCT thresholds for the 2025-26 year are: (a) the "general LCT threshold" of $89,332 (for the "fuel-efficient cars" — the cars with the fuel consumption below 7 litres per 100 km), (b) the "standard LCT threshold" of $79,932 (for the "other cars"); the LCT rate is 33% of the "LCT value" above the threshold (the "LCT payable" = (the "LCT value" — the "LCT threshold") x 33% x 10/11); the LCT is payable by the "dealer" (the "supplier" of the car) and is included in the price paid by the buyer; the FBT on the car fringe benefits — the car fringe benefit arises when the employer provides the car to the employee for the private use; the FBT on the car is calculated using: (a) the "statutory formula method" (the "flat 20%" — the taxable value is 20% of the "base value" of the car), OR (b) the "operating cost method" (the "logbook method" for the FBT — the taxable value is the "operating costs" multiplied by the "private use percentage" determined by the logbook); the GST on the car purchases — the GST is included in the price of the car at 10%; the business can claim the "GST credits" (the "input tax credits") for the GST included in the purchase price of the car if the business is registered for the GST and the car is used for the business purposes (the "creditable acquisition"); the GST credit is available for the "car limit" (the "car cost limit" of $68,108 for the GST purposes) — the GST credit is limited to 1/11th of the car limit (the "maximum GST credit" of $6,191 for the 2025-26 year). All amounts in Australian Dollars (AUD). For related reading, see our Business Expenses Guide → and Fringe Benefits Tax Guide →.
Cents Per KM vs Logbook
- Cents per km (85c): The deduction is 85 cents per business kilometre up to 5,000 km. No logbook is required. The method is available to the individuals only. The maximum deduction is $4,250 (5,000 km x 85 cents). The rate is set by the ATO and is updated annually.
- Logbook method: The deduction is based on the actual expenses apportioned by the business use percentage. The logbook must be maintained for 12 consecutive weeks every 5 years. The business use percentage is applied to the total car expenses. The method is available to all the entity types (the individuals, the companies, the trusts, the partnerships).
For the car limit (the $68,108 cap) and the luxury car tax, see our Business Expenses Guide →.
Luxury Car Tax — 2025-26
- $89,332 (fuel-efficient): The LCT threshold for the fuel-efficient cars (the cars with the fuel consumption below 7 litres per 100 km) is $89,332. The LCT at 33% applies to the value above the threshold. The fuel-efficient cars include the hybrid and the electric vehicles.
- $79,932 (standard): The LCT threshold for the standard cars is $79,932. The LCT at 33% applies to the value above the threshold. The LCT is included in the price of the luxury car and is collected by the ATO from the dealer.
For the FBT on the car benefits and the electric car FBT exemption, see our Fringe Benefits Tax Guide →.