How to maximise your vehicle deductions

Want to maximise your vehicle deductions? Like most ATO rules, the rules for vehicle deductions are complex. Failure to understand and follow the rules may see you miss out on hundreds or thousands of dollars of savings. Knowing and applying the rules can also appear complicated and confusing.

The risk of not applying the rules properly is compounded by the risk of an ATO audit as vehicle deductions are a key investigation area for the ATO.

Having seen many businesses make mistakes with vehicle deductions, this guide aims to simplify what you need to understand and the process to follow to ensure you maximise your deductions by following a four step process.

After the four steps, the guide then looks at
• ATO rules and deductions employees work vehicles
• Claiming depreciation on your vehicle
• Claiming GST on the purchase of a vehicle
• What happens if your business uses a trust or company but the car is owned by you personally

Step 1. Designate your vehicle as either a ‘car’ or an ‘other vehicle’ according to ATO classifications.

This is necessary because the ATO splits vehicles into cars and other vehicles and has different rules for deductions for each.

Cars are defined as motor vehicles (including four-wheel drives) designed to carry both a load less than one tonne and fewer than nine passengers.
Other vehicles are typically commercial vehicles (however include motorcycles) and include vehicles designed to carry either one tonne or more (such as a ute or panel van) or nine passengers or more (such as a minivan).

If you are unsure whether your vehicle meets the definition of an ‘other vehicle’, see the ATO’s Table 1 at https://bit.ly/2MCuO8H for full details.

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