Car Loan Tax Deductible? Uncover Savings Fast (2026)

When it comes to managing your finances, especially in Australia, understanding which expenses can be tax-deductible is crucial. If you're considering a car loan, you might be wondering if the interest on that loan can be deducted from your taxes. This is a common question, and knowing the answer could potentially save you a significant amount of money. Let’s dive into the details of car loan tax deductions in Australia and how you can make the most of them.

Understanding Car Loan Tax Deductions

In Australia, the tax-deductibility of a car loan primarily hinges on how you use the vehicle. If you use your car for business purposes, you might be eligible to claim a portion of your car loan interest as a tax deduction. The key factor here is the percentage of the vehicle's use that is for business purposes versus personal use. The Australian Taxation Office (ATO) stipulates that you can only claim deductions for the business portion of your car expenses, including loan interest.

Current Interest Rates and Loan Options

As of 2026, car loan interest rates in Australia typically range from 6.49% to 12%, depending on various factors such as credit score, loan amount, and the lender you choose. With Esteb and Co's access to a vast panel of 83+ lenders, finding a competitive interest rate that suits your financial situation is more achievable.

Eligibility for these loans generally requires a steady income, a good credit score, and proof of the vehicle’s business use. It's important to compare different lenders to find the best terms and rates that align with your financial goals.

Steps to Claim Car Loan Interest as a Tax Deduction

Claiming car loan interest as a tax deduction involves a few key steps:

1. Determine Business Usage: Keep a detailed logbook for at least 12 weeks to establish the percentage of business use. This logbook must include dates, distance travelled, and the purpose of each trip.
2. Calculate Deductible Amount: Once you know the business use percentage, apply this to your total car loan interest for the tax year to determine the deductible amount.
3. Maintain Accurate Records: Ensure you keep all documentation, including loan statements and receipts, to substantiate your claim if required by the ATO.
4. Consult with a Tax Professional: To maximise your deductions and ensure compliance, consider consulting with a tax professional who can provide tailored advice based on your circumstances.

Tips and Considerations

Here are some expert tips to consider when dealing with car loan tax deductions:

• Understand Depreciation: Besides interest, you can also claim depreciation on your vehicle if it’s used for business purposes. Ensure you account for this in your tax return.
• Review Loan Terms Annually: As interest rates fluctuate, it’s wise to review and possibly refinance your car loan to ensure you’re getting the best rate available.
• Keep Up with Tax Legislation: Tax laws can change, so staying informed about any updates that may affect your deductions is crucial.
• Utilise Esteb and Co’s Resources: With access to over 83 lenders, Esteb and Co can help you find a loan that not only offers great terms but also aligns with your tax strategy.

Frequently Asked Questions

Here are some common questions about car loan tax deductions:

1. Can I claim the full interest as a deduction? No, you can only claim the portion of the interest that correlates to business use of the vehicle.
2. What is considered business use? Business use includes any travel directly related to your job or business operations, excluding commuting to and from work.
3. Do I need a logbook? Yes, a logbook is the most reliable way to establish and support the business use percentage of your vehicle.
4. Can I claim other car expenses? Yes, in addition to interest, you can claim other expenses such as fuel, maintenance, and insurance, proportionate to business use.
5. Is refinancing an option? Yes, refinancing can help you secure a better interest rate, potentially reducing your overall interest payments.
6. What if my business use changes? If your vehicle’s business use percentage changes, you’ll need to update your logbook and adjust your claim accordingly.