Simply buying a car through your company doesn’t necessarily result in a significant tax break. There are various factors you need to consider before determining if purchasing a vehicle for business is the right decision.
Here are some key aspects you need to consider when buying a car for tax write-off purposes for your Australian business this year.
What is Australia’s business car Tax Write-Off?
A business tax write-off is an expense that can be deducted from your taxable income. The ATO allows businesses to claim a deduction for the cost of a car if it’s used for business purposes. This includes the cost of running and maintaining the car. However, the amount you can claim depends on the type of car, how much you use it for business, and the method you choose to calculate your deductions.
To qualify for a car tax write-off in Australia in 2025 involves several steps:
1. It MUST primarily be used for ‘Business Purposes’
You need to ensure that more than 50% of the car’s usage should be for business-related activities.
2. Maintain accurate records
It is important to maintain accurate records of the car’s usage. This includes maintaining a logbook documenting the car’s business use and all expenses related to the car, such as fuel, maintenance, insurance, and registration fees.
3. Choose the right calculation method to write off
The ATO allows two main methods:
Logbook method
The logbook method is based on the actual expenses and business use percentage of the car. In contrast,
Cents per kilometre method
This method allows you to claim a fixed rate for each business kilometer, up to a maximum of 5,000 kilometers per year.
What is ‘instant asset write-off’
Under this rule, you can immediately claim a small business tax write-off for the cost of the business-use portion of the vehicle in the same year that you first used it.
Generally, the vehicle cost would have to be less than the relevant threshold. The threshold has changed numerous times over the past few years. For the 2024-25 financial year, eligible businesses with turnover of less than $10 million can immediately deduct the full purchase price of an asset if the value is less than $20,000. So, the car limit would be $20,000 if you wanted to claim an immediate deduction for the entire cost.
