Business Vehicle Tax Deductions in Australia: Claiming a Ute

Buy a ute for the business and the usual expectation is a full write-off in the first year. Business vehicle tax deductions in Australia work that way only at the cheap end. The $20,000 instant asset write-off tests the vehicle’s full cost, not the business share. On the ATO’s own example, a $40,000 ute used 40% for business can’t be written off, even though the business share is only $16,000. That $16,000 goes into the small business pool instead and deducts $2,400 in the first year, so writing off the lot overstates the deduction by $13,600.

Two questions sit in front of every vehicle figure: whether the vehicle is a car for tax purposes, and which structure owns it. Between them they decide the method you can use, whether a depreciation cap applies, and whether a company pays fringe benefits tax on the private kilometres.

Among small business tax deductions, the vehicle is the one built from records kept during the year, because a logbook has to be kept while the driving happens, not reconstructed at tax time. What follows covers the car test, the method each structure allows, buying the vehicle, private use and FBT, and the paper trail.

What a business can claim on a vehicle

A business claims two things on a vehicle: the cost of running it each year, and the cost of the vehicle itself, written off or spread over time. Both are limited to the business-use share. The ATO’s list of deductible vehicle costs is short:

• fuel and oil
• repairs and servicing
• interest on a vehicle loan
• lease payments
• insurance
• registration
• depreciation, the decline in the vehicle’s value

The vehicle has to be owned, leased or under a hire-purchase agreement. The private share of every item on that list is out. The ATO’s wording is that the percentage for private use “isn’t claimable”, and it flags business-use percentages as an area where it often sees errors. A vehicle used 70% for business gets 70% of its costs.

On a vehicle loan, the interest is a running cost and counts on the business share. The principal doesn’t, because the vehicle’s cost already comes in through depreciation or the write-off, and deducting the repayments as well would claim the same dollars twice.

Is your ute a car? The one-tonne test

For income tax, a car is a vehicle designed to carry a load of less than one tonne and fewer than 9 passengers. A vehicle outside either limit is another kind of vehicle: a one-tonne ute or panel van, or a minivan built for 9 or more passengers. Motorcycles sit outside the car rules too. Neither the body shape nor the word “ute” on the registration papers decides it.

Payload does. It’s the gross vehicle mass printed on the compliance plate, less the basic kerb weight, which is the vehicle with a full tank, fluids, spare wheel and tools but no load or occupants. Under 1,000 kg and the ute is a car. At 1,000 kg or more it isn’t. Dual cabs vary on this, so check the figures for the exact variant you’re buying rather than the model name.

The one answer settles three things at once:

• A sole trader or partnership can use cents per kilometre or a logbook only for a car, and must use actual costs for anything else.
• The car limit caps the cost you depreciate on a car, and a one-tonne ute or van has no such cap.
• For a company, a dual cab’s payload is part of whether the FBT exemption for limited private use is available at all.

A motorcycle or scooter is never a car, so a rider claims on actual costs from the first kilometre, the same position delivery drivers on two wheels are in.

Your structure picks the method

A sole trader or partnership claiming for a car chooses between cents per kilometre and a logbook, and can change methods from year to year. For any vehicle that isn’t a car, the same sole trader must use actual costs. A company or trust uses actual costs for every vehicle it owns, whatever the vehicle is. The ATO’s page on motor vehicle expense calculation methods sets this out by structure, and warns that using the wrong method “can lead to incorrect claims”.

Who owns the vehicle	A car	Any other vehicle
Sole trader	Cents per kilometre or logbook	Actual costs
Partnership with at least one individual partner	Cents per kilometre or logbook	Actual costs
Company or trust	Actual costs	Actual costs

For a tradie, the tradie tax deductions guide applies this table to the ute, the tools and the drive between jobs.

Cents per kilometre

Cents per kilometre multiplies your business kilometres by a set rate: 91 cents for 2026-27, and 88 cents for 2025-26, the year most people are lodging now. It’s capped at 5,000 business kilometres per car, so the most it can produce is $4,550 for 2026-27, or $4,400 for 2025-26.

The rate covers every car cost, including fuel, servicing, registration, insurance and depreciation, so nothing is added on top. No receipts are needed, but you do need a record of how you worked out the kilometres, such as a diary.

The logbook

The logbook method sets a business-use percentage from your actual driving and applies it to every car cost, depreciation included. Business kilometres divided by total kilometres gives the percentage. On the ATO’s own example, 6,600 business kilometres out of 11,000 is 60%, and 60% of $9,000 in car expenses is a $5,400 deduction. The same driver on cents per kilometre stops at 5,000 kilometres, which is $4,400 at the 2025-26 rate.

The logbook has to cover at least 12 continuous weeks that represent your driving across the year. Once kept, it’s valid for five years, provided you record the odometer at the start and end of each later year it covers. A change in the kind of work the business does can mean starting a new one.

Actual costs

Actual costs means the receipts for each running cost, plus depreciation, multiplied by the business-use share. It’s the only method for a one-tonne ute, a van or a motorcycle, and the only method a company or trust has. There’s no 12-week requirement attached to it, but you still have to support the business-use percentage, and a logbook is the easiest way to do that.

For a company, private use by a director or employee raises a separate question, fringe benefits tax, covered below.

Buying the vehicle: write-off, pool or depreciation

The price of the vehicle isn’t a running cost. A small business using the simplified depreciation rules (aggregated turnover under $10 million) brings it into the claim one of two ways, and the vehicle’s full cost decides which:

• With a full cost under $20,000, the instant asset write-off deducts the business share in the year the vehicle is first used or installed ready for use. The $20,000 limit applied for 2025-26 and is permanent from 1 July 2026.
• With a full cost of $20,000 or more, the business share goes into the small business pool, which deducts 15% in the first year and 30% of the remaining balance each year after.

The test is the full cost, and the business share doesn’t rescue a dearer vehicle. The ATO’s instant asset write-off page uses a ute to show it. If you trade in an old vehicle, the cost for this test is the price before the trade-in comes off.

The same full-cost test applies to everything bought under the instant asset write-off, from a laptop to a trailer, not just vehicles.

The car limit

For a car, the cost you can depreciate is capped at the car limit for the year it’s first used: $69,883 for 2026-27 and $69,674 for 2025-26, according to the ATO’s 2026-27 car thresholds. For a business not registered for GST, a $90,000 car first used in 2026-27 and used wholly for business is depreciated from $69,883, not $90,000. The limit applies only to cars, so a one-tonne ute or a van at the same price depreciates from its full cost. Pages still quoting $69,674 as the current figure are a year behind.

GST on the purchase

A business registered for GST claims the GST in the price as a credit on its BAS, for the business-use share only, and leaves that credit out of the vehicle’s cost for depreciation or the write-off. A business that isn’t registered includes the GST in the cost. For a car priced above the car limit, the credit is generally capped at one-eleventh of the limit, which is $6,353 for 2026-27. Credits have to be claimed within four years.

Loan interest is a running cost, claimed on the business share each year, and so are lease payments on a leased vehicle.

Private use, and the drive from home

Driving between your home and your place of business is private use, even in a vehicle the business owns. The ATO makes one exception: a home-based business can claim trips from home to other places when the trip is for the business, and it gives examples.

Whichever trips count, you need to be able to show how you got to the percentage you claim. The ATO names a logbook or a diary as the way to record private travel against business travel, and the same records sit behind a cents-per-kilometre claim.

Company vehicles and FBT

A company claims its vehicle costs on actual costs. When a director or employee also uses the vehicle privately, that private use is a fringe benefit, and the company owes fringe benefits tax on it unless an exemption applies. A sole trader’s own ute is a different question: there’s no FBT on it, just the business-use percentage on the return.

The FBT exemption for eligible vehicles needs two things, and both have to hold:

1. It’s an eligible vehicle: a single cab ute, a panel van or goods van, a dual cab designed to carry one tonne or more (or one not designed mainly to carry passengers), or any other vehicle designed to carry one tonne or more or 9 or more passengers.
2. Private use is limited to travel between home and work, travel incidental to work, and other private use that is “minor, infrequent and irregular”.

Home to work is still private use, but it’s the kind the exemption allows. The ATO’s small business newsroom singles out dual cabs, calling it “a common myth” that dual cab utes are automatically exempt. Its examples of use that’s fine are the occasional trip to the tip or helping a mate move house. Using the ute as “the family taxi or for weekend personal trips” is not exempt, and FBT applies.

The company has to be able to show the use fits, for example by comparing odometer readings with the distance between home and work. If either condition fails, the private use is a fringe benefit: an FBT return, FBT to pay, and the benefit reported through Single Touch Payroll once the employee’s fringe benefits exceed $2,000 in taxable value for the FBT year. The FBT itself is deductible to the company. FBT has its own year and its own return dates, which sit in the small business tax calendar alongside BAS and the income tax return.

Records to keep

Keep vehicle records for five years. The ATO’s list for a business claim:

• Kilometres travelled, split between business and private
• Receipts for fuel, oil, repairs, servicing and insurance
• Loan or lease documents
• Tax invoices, including the one for the vehicle itself
• Registration papers
• How you calculated the claim
• The logbook, if you use the logbook method

How long to keep tax records depends on the record. Depreciation records run five years from the last year you claim depreciation on the vehicle, not from the year you bought it.

Getting the vehicle claim right on your return

Most of the vehicle claim is settled before the year starts: the payload checked when the vehicle is bought, the method chosen, the logbook started in the first weeks of use. At tax time what’s left is arithmetic on records that already exist.

A sole trader tax return is $330 with your personal return included, and one vehicle logbook is inside that fixed fee. Fixed fees assume tax-ready records, and a spreadsheet, or your bank transactions plus a list of expenses, is a fine place to start.