Commercial Vehicles

Commercial vehicles are permanent feature of the Aussie business landscape. From trusted utes and commercial trucks to vans and sedans, for many business owners vehicles are considered a standard cost of doing business.

Yet they can also be a common tax trap. Without the right knowledge of the various deductions and thresholds, chances are you're paying more tax than you should or (as is common among busy business owners) making incorrect deductions that could potentially leave your business on the wrong side of the ATO.

In this guide we reveal the secrets of business vehicles, and how you can leverage various incentives and write-offs to maximise your deductions.

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What is a commercial vehicle?

In Australia, commercial vehicles are defined and categorised based on their intended use and purpose. Categorisations are important for taxation, registration, and regulatory purposes. Main vehicle categories include:

What are common commercial vehicle tax deductions?

There are a range of deductions and write-offs available to business owners who operate commercial vehicles. Depending on your business and type of vehicle, legitimate expenses may include:
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Fuel and oil

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Repairs and servicing

Interest on loans

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Lease payments

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Insurance cover premiums

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Registration

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Depreciation (decline in value)

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Fuel and oil

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Repairs and servicing

Interest on loans

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Lease payments

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Insurance cover premiums

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Registration

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Depreciation (decline in value)

Quick Tip: It’s always best to get advice from a qualified tax professional when calculating business-related vehicle deductions. Contact Retinue to get started.

How can I maximise deductions on my commercial vehicles?

There are a number of simple things you can do to help maximise the deductions on your commercial vehicles.

Choose the Right Vehicle

Select vehicles that are eligible for tax deductions. In Australia, vehicles classified as “commercial vehicles” often receive more tax incentives. These can include vans, trucks, and other vehicles primarily used for business purposes.

Claim Depreciation

You can claim deductions for the depreciation of your business vehicle’s value over time. There are different methods to calculate depreciation, such as the diminishing value method or the prime cost method. Consult with your accountant to determine the best approach for your business

Keep Accurate Records

Maintain detailed and accurate records of all vehicle-related expenses, including fuel, maintenance, repairs, insurance, registration, and interest on loans. Proper documentation is crucial to support your claims and deductions.

Use the Correct Recording and Tracking Method

To maximise your deductions, make sure you’re using the correct method to record your expenses which may vary depending on your business structure and vehicle type.

Consider Leasing

Depending on your circumstances, leasing a vehicle rather than purchasing it outright might provide you with more flexible tax deductions. Leasing payments could be fully deductible if the vehicle is used solely for business purposes.

Maximise Fuel Tax Credits

If your business uses vehicles for traveling long distances, you may be eligible for fuel tax credits (FTCs). These credits can offset the excise or customs duty you pay on fuel. Keep accurate records of fuel usage and consult your accountant for guidelines on claiming FTCs.

Employee Contributions

If employees use company vehicles for personal use, consider implementing an employee contribution arrangement. This allows employees to contribute towards the cost of using the vehicle for personal purposes, which can reduce the fringe benefits tax (FBT) liability for your business.

Fringe Benefits Tax (FBT)

Be aware of the FBT rules and exemptions. Vehicles used primarily for business purposes may be exempt from FBT, but personal use of company vehicles can trigger FBT liabilities. Consult with a tax professional to manage FBT obligations effectively.

Seek Professional Advice

Tax laws and regulations can be complex and subject to change. Consulting with a qualified tax advisor or accountant who specialises in small business taxation can help you navigate these complexities.

Remember, individual circumstances vary, so it’s important to tailor these tips to your specific business situation. Always stay informed about the latest tax rules and seek professional advice to ensure you’re making the most informed decisions for your small business.

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How should I track and calculate my vehicle expenses?

When it comes to claiming deductions, it’s important to understand the different reporting and
tracking methods available, which can vary depending on business structure and vehicle type. Let’s take a look at each method so you can determine which is best for your business.**

When claiming for a car, you’re able to use either the cents per kilometre method or the logbook method (you can use different methods for different cars and you can also change methods from year to year). However, when claiming for another vehicle, you must use the actual costs method.

Cents Per Kilometre Method
  • Uses a set rate for each kilometre travelled for business
  • Allows you to claim a maximum of 5,000 business kilometres per car, per year
  • Doesn’t require written evidence to show exactly how many kilometres you travelled (but the ATO may ask you to show how you worked out your business kilometres, for example diary records)
  • Uses a rate that takes all your vehicle running expenses (including registration, fuel, servicing and insurance) and depreciation into account
Logbook Method
  • Purchase a logbook (these are typically available from most stationers or office supply stores).
  • Work out your business-use percentage by
    • dividing the distance travelled for business by the total distance travelled
    • then multiplying by 100.

Your logbook must contain:

  • When the logbook period begins and ends. Typically you are required to record 12 continuous weeks during the income year
  • The car’s odometer readings at the start and end of the logbook period.
  • The total number of kilometres the car travelled during the logbook period.
  • The number of kilometres travelled for each journey. If you make two or more journeys in a row on the same day, you can record them as a single journey.
  • The odometer readings at the start and end of each subsequent income year your logbook is valid for
  • The business-use percentage for the logbook period
  • The make, model, engine capacity and registration number of the car

For each journey, record the:

  • Reason for the journey (such as a description of the business reason or whether it was for private use)
  • Start and end date of the journey
  • Odometer readings at the start and end of the journey
  • Kilometres travelled
Actual Costs Method

The actual cost method is where you claim expenses based on actual receipts.


You can only claim the percentage of the actual costs that relate to business use of the vehicle. Therefore, if a vehicle is used for both business and private purposes, you must separate private from business use and keep records that allow you to work out the business use percentage.

Quick tip: It’s important to note that tax laws and regulations can change, so it’s always a good idea to consult with a qualified tax professional when calculating and claiming tax deductions related to your vehicles.

Claims for Sole Trader or Partnership

For sole traders, when claiming for a car, you’re able to use all three of the methods outlined above (you can use different methods for different cars and you can also change methods from year to year).

However, when claiming for another vehicle, you must use the actual costs method.

Claims for Companies or Trusts

These businesses must use the actual costs method to work out motor vehicle expenses, regardless of the type of motor vehicle.

Resources

FAQ

Typically, a business owner would be able to claim the following deductions and write offs for their commercial vehicles:
  • Fuel and oil
  • Repairs and servicing
  • Interest on loans
  • Lease payments
  • Insurance cover premiums
  • Registration
  • Depreciation (decline in value)

Quick Tip: It’s always best to get advice from a qualified tax professional when calculating business-related vehicle deductions.

In Australia, business vehicles are defined and categorised based on their intended use and purpose. Categorisations are important for taxation, registration, and regulatory purposes. Main vehicle categories include:

Light Commercial Vehicles (LCVs)

These are vehicles designed primarily for carrying goods and have a Gross Vehicle Mass (GVM) of up to 4.5 tonnes. Examples include vans, utes and small trucks used for business purposes.

Heavy Commercial Vehicles (HCVs)

These are vehicles with a GVM exceeding 4.5 tonnes. They include larger trucks and transport vehicles used for transporting goods.

Business Passenger Vehicles

These are passenger cars that are primarily used for business purposes. They may be owned or leased by a business for employee transportation or other business-related activities. Tax implications and deductions may vary based on their business use percentage.

Specialised Vehicles

Specialised vehicles are those designed for specific business purposes, such as construction, agriculture, or emergency services. Examples can include bulldozers and tractors.

Fleet Vehicles

Fleet vehicles refer to a group of vehicles owned or operated by a business or organisation. These vehicles can include passenger cars, LCVs, and HCVs, and they are typically managed as a single entity.

Rental Vehicles

Rental vehicles are used by businesses in the short-term for various purposes, including transporting employees or clients, attending meetings, or for specific projects.

Government and Non-Profit Vehicles

Government agencies and non-profit organisations often have their own categorisation and taxation rules for vehicles used in their operations.

2023–24: 85 cents per kilometre

2022–23: 78 cents per kilometre

2020–21 and 2021–22: 72 cents per kilometre

2018–19 and 2019–20: 68 cents per kilometre

2017–18: 66 cents per kilometre

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