Can a sole trader claim their car loan repayments as a tax deduction?

Not the whole repayment. The principal portion of a car loan repayment is never deductible (it's the cost of acquiring the asset). The interest portion is deductible to the extent the car is used for business. Depreciation on the car itself is also deductible against the business-use percentage, capped at the $69,674 car limit for 2025-26. The repayment as a whole is irrelevant to tax; the interest charged on the loan and the decline in value of the car are the two deductible numbers.

What is the car limit for depreciation in 2025-26?

$69,674 GST-inclusive for cars first used or leased in the 2025-26 income year. This is the highest value that can be used to calculate depreciation, regardless of what the car cost. The GST credit (if you're GST-registered and the car is used for business) is also capped at 1/11 of the car limit, which works out to $6,334 for 2025-26. The car limit is indexed each 1 July to the motor vehicle purchase sub-group of the CPI.

Can a sole trader use the $20,000 instant asset write-off for a car?

Only if the car cost less than $20,000 (the 2025-26 threshold) and the business has aggregated turnover under $10 million. Most cars cost more than $20,000, so the instant asset write-off doesn't apply and you depreciate the car normally instead (capped at the $69,674 car limit). The deduction is restricted to the business-use percentage of the car's cost, not the full purchase price.

Is travel from home to my business deductible?

Generally no. The ATO treats home-to-business travel as private use, unless you operate a home-based business and the trip itself was for business purposes (e.g. travelling from your home office to a client site). Including private trips in your business-use percentage is one of the most-flagged errors at audit and can lead to the whole claim being disallowed.

How long does an ATO logbook last?

A representative 12-week logbook is valid for 5 years, provided your business use pattern doesn't change materially. After 5 years (or sooner if your work changes) you need a fresh 12-week logbook to support the business-use percentage. You must still record odometer readings at the start and end of each subsequent income year.

Calculator · FY 2025-26 · Sole trader / ABN

Car Expense Deduction Calculator (Sole Trader / ABN)

Two ways to claim car expenses against business income: the simple 88c per kilometre method (capped at 5,000 km) and the logbook method (business-use percentage of fuel, registration, insurance, repairs, lease payments or car loan interest, and depreciation capped at the $69,674 car limit). Enter your numbers and the calculator shows both, recommends the bigger claim, and estimates the tax saving at your marginal rate.

Financial year Which income year you are claiming for 88c/km rate and $69,674 car limit apply to both 2024-25 and 2025-26

Expected taxable income (AUD / yr) Used only to estimate marginal rate for the tax saving Net business profit plus any wages / other income

Kilometres

Business kilometres this year Total km driven for business (client visits, deliveries, supply runs) Excludes home-to-business commute unless home-based business

Total kilometres this year Odometer end − odometer start Used to work out business-use percentage for logbook method

Running costs for the year (logbook method)

Fuel & oil ($/yr) Petrol, diesel, electricity charging Receipts, fuel card statements, or odometer estimate

Registration ($/yr) Annual rego fee paid this year QLD ~$800, NSW ~$1,000, VIC ~$900

Insurance ($/yr) Comprehensive (or third-party + property) Premium for the policy year, not per-month figure × 12 unless billed monthly

Repairs & servicing ($/yr) Logbook services, tyres, brakes, mechanical Routine maintenance + any one-off repairs

Car loan interest paid ($/yr) Interest charged on the loan this year (not the repayment, not the principal) Check your loan statement. Principal repayments are NEVER deductible.

Lease payments ($/yr) Operating lease or chattel lease payments (instead of a loan) If you own the car outright or have a loan, this is 0

Depreciation: car cost, method, year of ownership

If you own the car (cash or via a loan / chattel mortgage), you can also claim its decline in value as part of the logbook method. The car limit caps the depreciable cost at $69,674 for 2025-26 (and 2024-25), regardless of what you paid.

Car cost (drive-away, AUD) What you paid (or financed) including on-road costs $0 if leased or claiming cents-per-km only

Year of ownership Which year of depreciation this is 1 = first year you started using it for business

Depreciation method Diminishing value (front-loaded) or prime cost (straight line) Cars: DV = 25% pa, PC = 12.5% pa (8-year effective life)

GST registered for the business? Affects how the car cost is split between GST credit and depreciable cost Sole traders under $75k GST turnover are typically not registered

Small business: aggregated turnover under $10M (eligible for $20k instant asset write-off in Year 1)

Calculations run in your browser. Nothing is sent.

Sources applied

Cents per kilometre rate, 88¢ for 2024-25 and 2025-26 · ATO QC33712 (Cents per kilometre method) · Legislative Instrument LI 2024/19 · 5,000 km cap per car per year
Logbook method · ATO QC33731 · representative 12-week logbook, valid for 5 years, business-use % applied to fuel, rego, insurance, repairs, interest on a car loan, lease payments and depreciation
Car limit for depreciation, $69,674 for 2025-26 (and 2024-25) · ATO QC105023 (Changes to car thresholds) · highest value used to work out decline in value of a passenger car < 1 tonne and < 9 seats
GST credit cap, $6,334 (1/11 of $69,674) · ATO QC105023 · maximum GST credit on the purchase of a car if GST-registered
Instant asset write-off, $20,000 for 2025-26 · ATO QC57214 · aggregated turnover < $10M, asset cost (or business portion of cost) under the threshold
Effective life of a passenger car, 8 years · ATO Effective Life Determination, since 10 May 2006 · DV rate 200% ÷ 8 = 25%, PC rate 100% ÷ 8 = 12.5%
Deductible expenses (fuel & oil, repairs & servicing, interest on loan, lease payments, insurance, registration, depreciation) · ATO QC33720 (Deductions for motor vehicle expenses)
Home-to-business travel is private · ATO QC33720 · unless home-based business and the trip itself is for business purposes

Verified against ato.gov.au

What the calculator does (and what it doesn't)

This calculator is for sole traders and individuals in partnerships claiming a car (passenger vehicle < 1 tonne and < 9 seats) used for business. Companies and trusts must use the actual-cost method and cannot use cents-per-km or the logbook method published on this page; the deduction concept is similar but the calculation labels differ on the company tax return.

The calculator does:

Compute the cents-per-km claim at the FY-correct rate, capped at 5,000 business km per car per year.
Compute the logbook claim as business-use % × (fuel + rego + insurance + repairs + interest on loan + lease payments + depreciation).
Apply the $69,674 car limit to the depreciable cost in Year 1, and reduce that cost by any GST credit you can claim on the purchase if you're GST-registered.
Check the $20,000 instant asset write-off in Year 1: if the car cost is under the threshold and aggregated turnover is under $10M, the business portion is deducted immediately instead of being depreciated over time.
Compute depreciation using either diminishing value (25% of opening adjustable value each year) or prime cost (12.5% of the original cost each year), based on the 8-year effective life for a passenger car.
Estimate the tax saving on the deduction at your marginal rate (including the 2% Medicare levy), so you can see what the deduction is worth in your pocket.
Recommend the higher-claim method, and flag the dollar difference.

The calculator does not:

Model fringe benefits tax (FBT). Sole traders generally don't have an FBT issue because they're not their own employer, but if your business is a company and you're an employee using a company car, FBT may apply, that's outside this calculator's scope.
Model the small business simplified depreciation pool. If you've allocated the car to the small business pool with a business-use % of 0%, you can't separately claim depreciation under the logbook method in the same year (see ATO QC57214). This calculator assumes you're outside the pool or haven't pooled this car.
Model luxury car tax (LCT). LCT applies to the dealer when a luxury car is first sold; it's already baked into the drive-away price you paid, so you don't claim it as a deduction.
Handle motorcycles or vehicles that carry > 1 tonne or > 9 passengers. Those vehicles are not "cars" under tax law, the car limit doesn't apply, and the actual-cost method is your only option.
Apportion costs incurred only partly in this income year (e.g. an insurance premium covering both this and next FY). Enter the portion that relates to this income year.

How each method works

Cents per kilometre (the simple one)

One number to remember: 88 cents per kilometre for 2024-25 and 2025-26, capped at 5,000 business kilometres per car per year. The rate already includes fuel, registration, insurance, servicing AND depreciation, so you can't claim any of those separately if you use this method. You don't need a logbook, but you must be able to show how you worked out your business km if the ATO asks, a diary, a calendar with client visits, a delivery roster, or odometer notes will do.

Maximum possible claim under this method: 5,000 × $0.88 = $4,400 per car. If your business driving is more than ~5,000 km a year, the logbook method almost always wins.

Logbook (the detailed one)

Keep a representative 12-week logbook (start & end odometer, date, purpose for every trip). Work out your business-use percentage:

business-use % = (business km ÷ total km during logbook period) × 100

Then for the whole income year you claim that percentage of every car expense, including:

Fuel and oil (petrol, diesel, EV charging)
Registration (the annual rego fee)
Insurance (the policy premium for the year)
Repairs and servicing (anything mechanical including tyres)
Interest on a car loan (not the principal, the principal is not a deduction at any point)
Lease payments if the car is leased
Depreciation (decline in value), capped at the $69,674 car limit

A 12-week logbook is valid for 5 years, provided your business-use pattern doesn't change. You still record opening & closing odometer readings every income year, and start a fresh 12-week logbook if your work pattern shifts (e.g. you change industries or move further from your usual job sites).

Depreciation on the car itself

Two methods, both based on the ATO's 8-year effective life for a passenger car (ID 2007/40):

Diminishing value: 25% of the opening adjustable value each year. Bigger deduction up front, smaller later (the car's book value decreases each year).
Prime cost: 12.5% of the original cost each year for 8 years. Same deduction every year. Smoother for forecasting; smaller total in years 1-3 than DV.

The car limit caps the cost used for depreciation: for a car first used for business in 2025-26 that cost, say, $80,000, the depreciable cost is reduced to $69,674. The first-year DV deduction at 100% business use would be $69,674 × 25% = $17,419; at 60% business use it's $17,419 × 60% = $10,451.

Instant asset write-off (Year 1 only)

For 2025-26 the threshold is $20,000 per asset and the business must have aggregated turnover under $10M. If the car cost is under $20,000, which is uncommon but happens for older or second-hand vehicles, the business-use portion of the cost is deducted immediately in Year 1 instead of being depreciated over 8 years. For cars over $20,000 the IAWO doesn't apply and depreciation proceeds as normal.

Common mistakes (and what the ATO does about them)

Claiming home-to-business travel as business km. Home-to-work is private under tax law unless the business itself is at home and the trip is for business purposes (e.g. driving from your home office to a client). The ATO regularly disallows the whole vehicle claim when this is wrong.
Claiming car loan repayments in full. Only the interest portion is deductible. The principal is the cost of acquiring the asset, recovered via depreciation, not as a recurring expense.
Double-claiming a per-km method and individual costs. Cents-per-km bundles everything (fuel, depreciation, insurance). You can use cents-per-km OR logbook, not both for the same car in the same year.
Missing the 12-week-logbook rule. A few weeks of trips at the end of the year isn't a logbook. The 12 weeks must be representative and continuous, and a logbook only lasts 5 years before it needs refreshing.
Forgetting the car limit. Buying a $90,000 car and claiming depreciation on the full $90k is wrong. The depreciable cost is capped at $69,674, and the GST credit is capped at $6,334 if you're registered.

Frequently asked

Can I claim my whole monthly car loan repayment?: No. Only the interest portion of each repayment is deductible, and only at your business-use percentage. The principal is the cost of acquiring the car; you recover that over time as depreciation (capped at the $69,674 car limit), not as a recurring expense. Your loan provider's annual statement will show interest charged separately from principal repaid, use that figure on your tax return.
What if I use the car 100% for business?: Then your business-use % is 100% and the logbook method claims the full annual cost (fuel, rego, insurance, repairs, interest, lease payments) plus depreciation (capped at the car limit). You still need a logbook to substantiate the 100% figure, and the ATO will be sceptical of "100% business" claims for any vehicle that could realistically be driven privately. Expect a query if the car is anything other than a clearly commercial vehicle (e.g. a sign-written van) or you have a separate personal car.
Should I use diminishing value or prime cost depreciation?: Diminishing value produces a bigger deduction in years 1-3 (25% of opening value each year), prime cost is smoother (12.5% of original cost every year). Over the full 8-year effective life, the total deduction is the same. DV is the common choice for vehicles because it matches how cars lose value, fast at the start, slower later. Once you choose a method for a given asset, you can't switch.
What does "business use" includes?: Travel between two work locations, travel from your business base to a client site, travel to pick up supplies, travel to meet clients or attend a job, and travel directly related to earning your assessable income. It does NOT include the daily commute from home to your usual workplace (that's private), trips with a primarily personal purpose, or travel home from a job that you treat as your usual end-of-day destination. The ATO's logbook method page (QC33731) lays this out in detail.
I just bought a $35,000 car this financial year and used it 70% for business. What can I claim in year 1?: Two pieces. Running costs for the year (fuel, rego, insurance, repairs, interest on the loan) × 70%. Plus depreciation at either 25% diminishing value or 12.5% prime cost, applied to the car limit if the car exceeds it (here $35k is under $69,674 so the full cost is depreciable), × 70%. On DV that's $35,000 × 25% × 70% = $6,125 of depreciation in year 1, on top of the 70% of all running costs. The cents-per-km method here would claim only 5,000 × $0.88 = $4,400 max, so logbook will win for any meaningful business use.
Does this calculator handle a car bought partway through the year?: It assumes a full year of ownership for simplicity. If you started using the car for business mid-year, depreciation is pro-rated by days held (days held ÷ 365). Running costs you enter should also reflect only the portion of the year you owned the car. The math holds; the inputs need to be the partial-year figures.