“Just buy a car through the business and write it off.” It is one of the most repeated pieces of pub tax advice in Australia — and one of the most misunderstood.

The real rules around the tax benefits of buying a car are more nuanced than the pub version, a lot less generous, and they depend heavily on your business structure, the price of the vehicle, the purpose of use, and the timing of the purchase. Get it right and you can legitimately claim depreciation, GST, and running costs. Get it wrong and you can end up with an unexpected FBT bill that wipes out any saving.

This article explains what you can and can’t claim when you buy a car for your Australian business in 2026, walks through a worked example, and flags the issues we see most often. If you want this checked against your specific purchase, our team at Trinity Accounting Practice can run the numbers before you sign anything.

The Three Things You’re Actually Claiming

When a business buys a car, there are three separate tax angles in play:

Depreciation — claiming the decline in value of the vehicle over time as a deduction against business income.
GST — claiming back the GST included in the purchase price (and running costs).
Running costs — fuel, insurance, registration, servicing, finance interest — claimable to the extent the vehicle is used for business.

None of these are automatic. Each comes with its own ceiling, its own substantiation requirement, and its own trap.

The Car Depreciation Limit (The One Most People Miss)

Here is the rule that catches new business owners: there is a car limit for depreciation and GST purposes. For the 2025–26 income year, the car limit is set by the ATO and updated annually.

What it means in practice:

If you buy a car costing more than the car limit, the depreciation deduction is calculated as if the vehicle cost only the limit amount.
The GST you can claim back is also capped at the GST component of the car limit.
The excess cost above the limit is effectively a “non-deductible” amount as far as depreciation goes.

This is why the often-quoted advice “just buy the Range Rover through the business” usually does not produce the saving people expect. The luxury portion of the purchase price isn’t a deduction — it’s just an expensive choice.

Check the current car limit on the ATO website before you buy. It is updated for each income year.

Business Use vs Private Use

The other reality check: the tax benefits scale with business use, not total use.

For a sole trader, depreciation and running costs are claimable in proportion to the business-use percentage. So if you use a $30,000 car 70% for business, you claim 70% of the depreciation and 70% of running costs against your business income.

For a company or trust that owns the car, the vehicle is generally treated as 100% for business purposes — but any private use by an employee (including the owner-director) becomes a fringe benefit, attracting FBT. The FBT bill on a vehicle used heavily for private purposes can easily exceed the income tax saving from claiming the deduction. This is the bit the pub advice always forgets.

How to Substantiate Business Use

To claim a business-use percentage, you need evidence. The ATO accepts two methods for sole traders / partners:

Logbook method — keep a representative 12-week logbook recording every trip (date, odometer, purpose). The percentage from the logbook can then be applied for up to 5 years (unless circumstances change materially).
Cents per kilometre method — claim a set rate per business kilometre, capped at 5,000 business kms per car per year. No logbook needed, but no claim for actual fuel / depreciation either. The rate is set by the ATO each year.

For companies and trusts using FBT, a logbook is typically used to calculate the operating-cost method and reduce the FBT base.

Instant Asset Write-Off / Temporary Depreciation Rules

Over the last several years the ATO has run various accelerated depreciation regimes — Temporary Full Expensing, an extended Instant Asset Write-Off, and modified small business depreciation rules. These have shifted multiple times.

The key point for 2025–26: verify the current threshold and rules at the time of purchase. The instant write-off threshold for the 2025–26 income year, and which businesses qualify, is published on the ATO website. Even if you qualify for an instant write-off, the car limit still applies — you cannot instantly write off more than the car limit amount.

Worked Example: A Sole Trader Sydney Tradie

Let’s walk through a realistic Sydney example.

Jake is a sole trader carpenter operating from Hurstville. In May 2026 he buys a ute for $48,000 (drive-away, including GST). He estimates 80% business use based on a logbook he keeps over the next 12 weeks.

GST component: approximately $4,363 (1/11th of $48,000).
GST claim: limited to 80% (business-use) × the GST component within the car limit. Approximately $3,490 GST credit.
Depreciation base: $48,000 less GST credit claimed = approximately $44,510, capped at the current car limit if that’s lower. Then apply 80% business use.
Running costs (fuel, rego, insurance, servicing): 80% claimable as business expense.
Likely first-year tax deduction: meaningful, but not “$48,000 off your tax bill” the way some pub advice suggests.

The actual numbers depend on the car limit applicable in his income year, whether his business qualifies for any accelerated depreciation, and his marginal tax rate. The takeaway: a real deduction is available, but it is fractional of the headline purchase price.

The Mistakes We See Most Often

Buying a luxury car expecting to write off the lot. The car limit caps the deductible portion. The rest is just a cost.
Buying a “dual cab ute” assuming the car limit doesn’t apply. The car limit doesn’t apply to vehicles that are designed to carry more than nine passengers or a load of 1 tonne or more — but plenty of dual cabs fall under that 1-tonne threshold. Check before you buy.
Putting a company-owned car on private use without an FBT plan. FBT at the going rate can be eye-watering.
Buying on 30 June. Buying on the last day of the financial year does not double the deduction — depreciation is calculated based on days held, so you get effectively one day’s deduction in year one.
Skipping the logbook. No logbook means no business-use percentage, which means a much smaller deduction.

A Trinity insight from 22 years in practice

The most expensive car-deduction mistake we see is buying through a company without modelling the FBT. We’ve sat with clients who saved $4,000 in income tax through a company-owned vehicle and then got hit with $9,000 in FBT on the private-use component. Always model both sides before you sign the contract. The right answer is often “buy in your personal name and claim a business-use percentage” — not “buy through the company.”

What This Means for You

If you are about to buy a car for work: get a quick tax pre-purchase review before you sign. The right vehicle, the right structure, and the right method can be the difference between thousands deductible and a few hundred.
If you have just bought a car: start a 12-week logbook this week. Without it, the deduction available to you is dramatically smaller.
If you’ve been told you can “write the whole thing off”: read the car limit on the ATO website. It is rarely as generous as people assume.

How Trinity Can Help

Trinity Accounting Practice helps sole traders, companies and trusts across NSW structure vehicle purchases tax-effectively — including running the pre-purchase numbers, modelling the FBT impact for company-owned vehicles, and managing logbook setup. As a registered tax agent practice with 22 years of NSW small business experience, we can usually tell you within an hour whether the purchase you’re planning will deliver the deduction you’re hoping for.

Book a 30-minute pre-purchase vehicle review with the Trinity team →

General advice only. This article contains general information current as at May 2026 and does not constitute tax, financial or legal advice. It does not take into account your personal circumstances, objectives, or needs. Car depreciation limits, instant asset write-off thresholds and FBT rates change — always verify current figures on ato.gov.au. Before acting on any information in this article, you should consider its appropriateness to your situation and seek professional advice from Trinity Accounting Practice or another qualified adviser.