As tax season approaches, financial adviser Ben Nash is bringing attention to an often-missed opportunity for Aussie taxpayers: the $4,400 car tax deduction available for those who use their vehicles for work.
While some are aware of the more comprehensive logbook method for claiming vehicle-related deductions, many are unaware of the simpler fixed-rate method, which could provide significant tax relief without the hassle of tracking every single trip. This deduction is especially beneficial for those who don’t drive extensively for work but still use their vehicles for business-related tasks.
The fixed-rate method allows taxpayers to claim 88 cents per kilometre for work-related travel, up to a maximum of 5,000 kilometres per year. This method offers a simple way to claim without the need for detailed record-keeping or maintaining a logbook. The ATO doesn’t require a full logbook under this method, but taxpayers must be able to back up their claims with evidence, such as dates and purposes of trips, in case they are asked by the ATO to verify their claims.
The Two Ways to Claim Car Deductions
When claiming tax deductions for car expenses, there are two primary methods: the logbook method and the fixed-rate method. The logbook method is the more detailed option, where taxpayers track all their work-related trips for a 12-week period. Once the work-related percentage of vehicle use is determined, individuals can claim a deduction for the expenses associated with that percentage. This method can be beneficial for those who drive extensively for work, but is more time-consuming and requires careful record-keeping.
In contrast, the fixed-rate method simplifies the process significantly. Instead of tracking every kilometre, taxpayers simply claim 88 cents per kilometre driven for work-related purposes. While the capped amount is lower than what might be possible under the logbook method, it’s far less labor-intensive and still offers a substantial deduction for those with moderate work-related driving. It’s also important to note that once a taxpayer selects a method for the year, they must stick to it — switching between the two methods within a single year isn’t allowed.
$4,400 ATO car tax deduction that most Aussies miss: 'Easy win' https://t.co/a5cN9nf38Z
— Yahoo Finance Australia (@YahooFinanceAU) June 4, 2025
Why Many Aussies Miss Out on This Deduction
According to Ben Nash, one of the biggest reasons many Australians miss out on this valuable tax deduction is simply a lack of awareness. Many people don’t realise they are eligible for the fixed-rate method or don’t know how easy it is to claim. Additionally, others may attempt to claim the deduction but do so incorrectly, either by miscalculating the kilometres driven or failing to keep the necessary supporting evidence.
It’s crucial for taxpayers to understand that the fixed-rate method is available to them, and they don’t need a detailed logbook if they follow this route. However, they must still be able to provide evidence of their work-related trips. This can include records of travel dates, destinations, and the purpose of each trip. By doing so, taxpayers can protect themselves from potential issues with the ATO if their claims are ever audited.
Ensuring Your Claim is ATO-Compliant
To ensure you are claiming the maximum allowable amount under the ATO’s rules, it’s essential to keep accurate records of your work-related driving. Even under the fixed-rate method, taxpayers must retain some form of proof for their work-related trips. Whether it’s a calendar noting travel dates or receipts for business-related purchases, it’s important to be prepared in case the ATO requests further documentation.
In addition, taxpayers should be mindful of the fact that personal travel, such as commuting between home and work, does not qualify for a deduction. Only travel directly related to work duties — such as visiting clients or attending business meetings — can be claimed. By keeping track of these trips and maintaining supporting evidence, taxpayers can avoid errors and maximise their deductions.
