Claim Car Loan on Tax? Discover the Truth (2026)

You've just acquired a new car to help manage your daily commute or perhaps to expand your small business. As you start making those car loan repayments, a question pops into your mind: "Can I claim these repayments on my tax?" It's a common query among car owners in Australia, and understanding the tax implications can significantly impact your financial planning and savings.

Understanding Car Loan Repayments and Tax Deductions

When it comes to car loans in Australia, it's essential to understand what can and cannot be claimed on your tax return. Generally, car loan repayments themselves are not tax-deductible. However, if you use your vehicle for business purposes, you may be able to claim certain expenses related to the vehicle. These could include depreciation, interest on the car loan, and running costs. The key is the distinction between personal use and business use, which determines the extent to which you can claim deductions.

Tax Deduction Rates and Options

Claiming deductions for car expenses requires a clear understanding of the available methods and their associated rates. In 2026, the Australian Taxation Office (ATO) provides two primary methods for claiming car expenses:

The logbook method allows you to claim a proportionate amount of the interest on your car loan as a deduction, based on the percentage of business use logged over the year. For example, if your car is used 60% for business, you can claim 60% of the interest paid during the year as a deduction.

How to Claim Car Expenses on Tax

To effectively claim car expenses on your tax return, follow these steps:

1. Determine Business Use: Assess how much you use your car for business versus personal purposes. This is crucial for applying the correct deduction method.
2. Select a Deduction Method: Choose between the 'cents per kilometre' or 'logbook' method based on your situation and preference.
3. Maintain Accurate Records: Keep detailed records of your car's usage. If using the logbook method, ensure the logbook is accurate and up to date.
4. Calculate Deductions: Use your chosen method to calculate eligible car expenses, including the interest portion of your car loan if applicable.
5. File Your Tax Return: When filing your tax return, include the calculated deductions, and ensure all supporting documents are ready in case of an ATO review.

Tips and Considerations for Car Loan Tax Claims

Here are some expert tips to maximise your tax deductions while ensuring compliance with ATO regulations:

• Consult a Tax Professional: Given the complexities of tax laws, consulting with a tax professional can provide insights specific to your situation, ensuring you claim the maximum allowable deductions.
• Leverage Technology: Use apps or software to track business kilometres and manage receipts, simplifying the record-keeping process.
• Regularly Update Your Logbook: If using the logbook method, update it regularly to reflect any changes in your vehicle's business usage.
• Understand Depreciation Rules: Familiarise yourself with the ATO's rules on car depreciation to maximise deductions beyond just loan interest.

Frequently Asked Questions

1. Can I claim the entire car loan repayment on my tax return?
   No, you cannot claim the full repayment. However, the interest component may be deductible if the car is used for business purposes.
2. How do I determine the business use percentage of my car?
   Keep a detailed logbook for a representative 12-week period to calculate the percentage of business use.
3. Is it necessary to keep physical receipts for all car expenses?
   While digital records are acceptable, ensure they are clear and complete. The ATO requires thorough documentation.
4. Can I switch between deduction methods each year?
   Yes, you can choose the method that best suits your situation each tax year.
5. How can Esteb and Co assist in managing my car loan?
   With access to over 83 lenders, Esteb and Co can help you find competitive car loan rates that align with your financial goals, potentially reducing overall interest payments.

Understanding the tax implications of your car loan can save you money and prevent headaches come tax time. Whether you're using your vehicle for business or personal purposes, knowing how to claim eligible expenses correctly is crucial. With the right approach and resources like Esteb and Co, you can navigate your financial landscape with confidence.