Small Business Car Write Off in Australia 2026

If you run a small business in Australia, you may be able to claim a tax deduction for a car used for business. The amount you can claim depends on how the car is used, your business structure, the cost of the vehicle, and whether the claim falls under the instant asset write-off, depreciation rules, or standard motor vehicle expense methods. For the 2025–26 income year, the ATO states eligible businesses can access a $20,000 instant asset write-off, the car limit is $69,674, and the cents-per-kilometre rate is 88 cents.

Many business owners use the phrase “car write off” to mean one thing, but in practice, there are several ways a deduction can work. That is why it is important to separate the purchase of the vehicle from the ongoing costs of running it. Once you understand that distinction, the rules become much easier to apply correctly.

Can a Small Business Write Off a Car in Australia?

Yes, a small business can claim a deduction for a car used for business purposes in Australia, but only for the business-use portion. That deduction is not always an immediate full write-off.

In some cases, an eligible business can claim the car under the instant asset write-off.

In other cases, the vehicle is depreciated over time. You may also be able to claim running costs such as fuel, registration, insurance, servicing, and repairs, depending on the method used.

How a Small Business Car Write Off Works

A small business car deduction usually falls into one of three categories.

The first is the instant asset write-off. For the 2025–26 income year, the ATO says eligible businesses with an aggregated turnover of less than $10 million can immediately deduct the business portion of an eligible asset costing less than $20,000, provided it is first used or installed ready for use between 1 July 2025 and 30 June 2026.

The second is depreciation. If the vehicle does not qualify for the instant asset write-off, or its cost sits above the relevant threshold, the claim generally falls under depreciation rules instead of an immediate deduction.

The third is motor vehicle running expenses. These include costs such as fuel, registration, insurance, maintenance, and repairs. The ATO says businesses can claim deductions for motor vehicles used in running their business, and business use needs to be separated from private use.

Who Can Claim a Small Business Car Write Off?

A sole trader, company, partnership, or trust can generally claim car-related deductions where the vehicle is used to earn business income. The exact method depends on the vehicle’s structure and type. For the instant asset write-off in 2025–26, the ATO says the business must have an aggregated turnover of less than $10 million and the eligible asset must meet the timing and cost rules.

For ordinary car expense claims, the ATO also recognises the cents-per-kilometre and logbook methods for cars, while some vehicles or situations require a different approach.

When the Instant Asset Write-Off Applies to a Car

The instant asset write-off can apply to a car, but it does not automatically apply to every business vehicle purchase.

For the 2025–26 income year, the ATO says eligible businesses can claim an immediate deduction for the business portion of an eligible asset costing less than $20,000, provided the asset is first used or installed ready for use between 1 July 2025 and 30 June 2026. The rule applies on a per-asset basis, meaning an eligible business can claim multiple assets if each asset falls below the threshold.

That does not mean the full sticker price of every vehicle is deductible. A car used partly for private purposes must be apportioned. If the vehicle is above the threshold, the instant asset write-off does not apply, and depreciation rules come back into play.

The ATO Car Limit for 2025–26

One of the most important rules in any small business car write-off discussion is the car limit.

The ATO says the car limit for 2025–26 is $69,674. This is the highest value you can use to calculate depreciation on a car used for business purposes. The ATO also says the maximum GST credit for 2025–26 is $6,334, which is 1/11 of $69,674.

This matters because buying a car above that figure does not give you a depreciation deduction based on the full purchase price. For example, if a business buys a passenger vehicle for more than the car limit, the claim is still capped by the ATO limit before business-use apportionment is applied.

Instant Asset Write-Off vs Depreciation for a Business Car

The instant asset write-off and depreciation are related, but they are not the same thing.

The instant asset write-off allows an eligible small business to deduct the business portion of an eligible asset immediately, provided the rules are met. Depreciation instead spreads the deduction over time. The practical takeaway is simple: not every vehicle purchase is an instant deduction, and not every “car write off” is a same-year claim.

This is why 2026 content on this topic needs to explain the decision path, not just the headline threshold.

What Car Expenses Can a Small Business Claim?

In addition to the purchase of the vehicle itself, a small business may be able to claim ongoing motor vehicle costs tied to business use. The ATO’s motor vehicle guidance covers common expenses such as fuel, registration, insurance, maintenance, repairs, and decline in value, depending on the claim method and circumstances.

In plain terms, your claim may include:

fuel and oil
registration
insurance
servicing and repairs
tyres
lease costs where relevant
interest on a car loan where relevant
decline in value where relevant

The key point is that you can claim only the business-use share of these costs unless a specific method uses a set rate.

Choosing Your Claiming Method: Logbook vs. Cents per Kilometre

For sole traders and small business owners, deciding how to claim vehicle expenses can have a significant impact on your final tax return. The ATO offers two primary methods, and choosing the right one depends on how much you drive for work and the type of records you keep.

1. The Cents per Kilometre Method

This is the simplest way to claim deductions. For the 2025–26 financial year, the rate is 88 cents per kilometre.

The Limit: You can claim up to a maximum of 5,000 business kilometres per vehicle.
The Math: If you drive 5,000km, your maximum deduction is $4,400.
The Benefit: You do not need to keep receipts for fuel or repairs. However, you must be able to show how you calculated your business kilometres (such as diary entries or work calendars).

2. The Logbook Method

If you drive more than 5,000km for business or have high running costs, the log book method often provides a larger deduction. It allows you to claim the business-use percentage of your actual vehicle expenses.

The Process: You must keep a logbook for a continuous 12-week period that represents your typical business use.
What You Can Claim: You can claim your percentage of fuel, oil, registration, insurance, repairs, and even interest on a car loan.
The Math: If your total expenses are $15,000 and your logbook shows 80% business use, your deduction is $12,000.
Requirement: You must keep all receipts and your logbook remains valid for five years unless your circumstances change significantly.

To help you decide, here is a quick comparison of the two methods for the 2025–26 financial year:

Feature	Cents per Kilometre	Logbook Method
Claim Rate	88 cents per business km	Percentage of actual expenses
Maximum Distance	5,000 business km per car	No limit on kilometres
Record Keeping	Diary or log of work trips	12-week logbook + all receipts
Depreciation	Included in the 88c rate	Claimed separately (business %)
Running Costs	Included in the 88c rate	Claimed separately (business %)
Best For	Casual business use (< 5,000km)	High business use or high costs

How to Work Out Business Use for a Car

You need to separate business travel from private travel. The ATO says you can use a logbook or diary to record private versus business travel.

This matters because a mixed-use vehicle is very common in small businesses. A car used for visiting clients, attending job sites, collecting stock, or travelling between work locations may have a deductible business component. Ordinary private travel does not become deductible just because you own a business.

A practical example helps. If your car use is 70% business and 30% private, then only 70% of eligible costs are generally claimable under the relevant method.

Records You Need for a Small Business Car Write Off

Good records are what hold the whole claim together.

For a vehicle purchase, keep the purchase invoice, finance documents, and evidence of when the car was first used or installed, ready for use. For running costs, keep receipts for fuel, insurance, registration, servicing, repairs, and any other relevant expenses. If you use the logbook method, keep a valid logbook and an accurate odometer reading. The ATO also says you should keep records for 5 years to substantiate your claim.

If you rely on the cents-per-kilometre method, you still need to be able to show how you calculated your business kilometres.

Avoiding Common Pitfalls and Compliance Risks

The ATO closely monitors motor vehicle claims. To ensure your records are ATO-proof, keep the following rules in mind:

Commuting is Private: Generally, travel between your home and your regular place of work is considered private use. You cannot include these trips in your business kilometres.
Ready for Use: To claim an asset under the write-off rules for the 2026 tax year, it must be physically ready for use in your business before 30 June 2026. Simply paying for it is not enough.
The “No Double Dipping” Rule: If you use the cents-per-kilometre method, you cannot claim depreciation or running costs separately, as they are already included in the 88-cent rate.

Small Business Car Write Off Examples

A sole trader buys a car for client visits and local supplier runs. If the business is eligible for the instant asset write-off and the business-use portion of the cost meets the ATO rules, it may be deductible immediately.

A company buys a passenger vehicle above the car limit. In that case, the depreciation value used for tax purposes is capped at $69,674 for 2025–26, not the full purchase price.

A small business owner uses one car for both business and personal trips. If a logbook shows 65% business use, the claim generally follows that 65% under the relevant method.

A sole trader drives fewer than 5,000 business kilometres for the year and wants a simpler method. The cents-per-kilometre method may be easier, with 88 cents per kilometre for 2025–26.

Let’s Build Your Business Future, Together

Tax season does not have to be a source of stress or a race against the clock. At Coleman Financial Group, we know that behind every tax return is a business owner who has worked hard to build something meaningful. You deserve more than just a data entry service; you deserve a partner who looks at the big picture and helps you keep more of what you earn.

Whether you are deciding between a new ute and a tech upgrade, or trying to work out which claiming method puts you in the best position, our business accountant team is here to provide clear, actionable advice. We take the guesswork out of the ATO rules so you can focus on what you do best—running your business.

If you are looking to finance your next big asset, construction or property, our mortgage broking experts can also help you secure the right deal for your circumstances.

Ready to maximise your 2025–26 deductions?

Don’t wait until June 30 to start thinking about your tax strategy. Let’s sit down and ensure your business is positioned for growth and full compliance.

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FAQs

Can a small business write off a car in Australia?

Yes, but only the business-use portion is deductible, and the claim may fall under the instant asset write-off, depreciation, or ordinary car expense methods depending on the facts.

Is the instant asset write-off available for cars in 2025–26?

Yes, the ATO says eligible businesses can access a $20,000 instant asset write-off for the 2025–26 income year where the rules are met.

What is the ATO car limit for 2025–26?

The ATO says the car limit for 2025–26 is $69,674.

What is the cents per kilometre rate for 2025–26?

The ATO rate is 88 cents per kilometre, with a maximum of 5,000 business kilometres per car, per year under that method.

Do I need a logbook?

If you want to use the logbook method, yes. The ATO says the logbook must cover a continuous 12-week period and is generally valid for up to 5 income years if usage stays representative.

Can I claim fuel and insurance as well?

Yes, depending on the method used. Under the cents-per-kilometre method, those costs are already included in the set rate, so they are not claimed separately.