Changes to Motor Vehicle Tax Deductions for Small Business Owners
As a small business owner, understanding how to manage vehicle-related tax deductions is key to reducing your taxable income and staying compliant with the ATO. The 2022–23 income year introduced two important changes that affect how you can claim motor vehicle expenses. Here's what you need to know to make the most of your deductions.
1. The Updated Cents per Kilometre Method
If you use your personal car for business-related travel, the cents per kilometre method remains a straightforward and convenient way to claim deductions.
New Rate: As of 1 July 2022, the rate has increased from 72 cents to 78 cents per kilometre.
Maximum Claim: You can claim up to 5,000 business kilometres per vehicle per year.
What’s Included: The 78 cents per kilometre covers all running costs including fuel, servicing, registration, insurance, and depreciation.
💡 Note: You can’t separately claim any car-related expenses if you choose this method. Keep a record of your kilometres travelled for business, logbooks or a diary will do.
2. Increase in the Car Limit for Depreciation
The car limit determines the maximum value you can use to calculate depreciation for passenger vehicles used in business.
2022–23 Car Limit: $64,741
This applies to passenger vehicles designed to carry less than one tonne and fewer than nine passengers.
Vehicles such as motorcycles, utes, and vans may be exempt depending on their load capacity and use.
📌 Tip: If your vehicle costs more than the car limit, you can only claim depreciation up to the limit, not the full cost.
Key Takeaways for Small Business Owners
Use the cents per kilometre method if you prefer simplicity and drive fewer than 5,000 km annually for business.
For higher-value vehicles or more extensive travel, consider the logbook method to claim actual costs, just ensure you keep detailed records.
Be aware of the car limit when purchasing a new vehicle to ensure your expectations around depreciation claims are realistic.
If you're unsure which method suits your circumstances or need help preparing your vehicle logbook, our team at Dolman Bateman is here to help you navigate the rules and keep your deductions optimised.
📞 Contact us today to review your motor vehicle claims before tax time.
Disclaimer: The information provided in this article is general in nature and does not constitute personal financial, legal or tax advice. All content relates to the current financial year only. Future changes to tax laws, thresholds or administrative requirements may affect the accuracy or relevance of this information, so you should always confirm that the guidance remains current. While every effort has been made to ensure accuracy at the time of publication, Dolman Bateman accepts no responsibility or liability for any loss or damage arising from reliance on this information. You should seek professional advice tailored to your circumstances before making any financial or tax decision.
