Claim Interest on Car Loan? Control Your Finances Fast

Are you wondering if you can claim interest on your car loan and save some money on your taxes? You're not alone. Many Australians are searching for ways to make their car loan expenses more manageable, especially with the rising interest rates in 2026. Navigating through tax deductions can be complex, but understanding whether you can claim interest on your car loan can potentially ease your financial burden.

Understanding Claiming Interest on Car Loans

When it comes to claiming interest on a car loan, the Australian Taxation Office (ATO) has specific criteria to determine eligibility. Generally, you can claim the interest if the vehicle is used for business purposes. This means if you use your car primarily for work, you might be eligible to claim the interest as a tax deduction. However, if your car is for personal use, claiming interest becomes a bit more challenging.

For those using their car for both personal and business purposes, only the portion of interest that corresponds to business use can be claimed. This requires maintaining a detailed logbook to substantiate your claims, including the percentage of business use versus personal use.

Interest Rates, Requirements, and Options

As of 2026, car loan interest rates in Australia typically range from 6.49% to 12%, depending on the lender and your credit profile. When considering claiming interest on your car loan, it's crucial to understand the requirements and options available.

When selecting a car loan, consider the interest rates and the eligibility criteria. For instance, Esteb and Co, with access to over 83 lenders, can help you find a competitive rate that suits your financial situation, whether you're buying a car for personal use or business purposes.

How to Claim Interest on Your Car Loan

To claim interest on your car loan, follow these steps:

1. Determine Eligibility: Ensure your vehicle is used for business purposes. Keep a logbook if the car is used for both personal and business purposes to accurately track the percentage of use.
2. Calculate Deductible Interest: If eligible, calculate the portion of interest applicable to business use. For example, if you use your car 60% for work, you can claim 60% of the interest paid.
3. Maintain Records: Keep all financial records, including loan statements and interest payments, as evidence to support your tax deduction claims.
4. Lodge Your Tax Return: Include the interest deduction in your annual tax return, ensuring all information is accurate and substantiated by your records.
5. Consult with a Tax Professional: It's advisable to consult with a tax professional to ensure you're maximizing your deductions and complying with ATO guidelines.

Tips and Considerations

Here are some expert tips to consider when thinking about claiming interest on your car loan:

• Accurate Record-Keeping: Maintain meticulous records of your car usage and interest payments. A well-documented logbook is crucial for substantiating your claims.
• Review Loan Terms: Understand your car loan's terms and interest rate. Refinancing might be an option if you're paying a higher interest rate than necessary.
• Assess Business Use: Regularly assess and document the percentage of business use to ensure your claims are accurate and justifiable.
• Professional Guidance: Engage a tax advisor to navigate the complexities of tax deductions and ensure you're not missing out on potential savings.

Frequently Asked Questions

1. Can I claim interest on my car loan if I use my car for commuting to work?

No, commuting between your home and regular workplace is considered private use, and interest on the car loan cannot be claimed for this purpose.

2. How do I calculate the business use percentage for my car?

Maintain a logbook for a continuous 12-week period, recording all business and personal trips to calculate the percentage of business use accurately.

3. Can I claim interest on a car loan if I am self-employed?

Yes, if you use the car for business purposes, you can claim the interest proportionate to the business use of the vehicle.

4. What happens if I don't keep a logbook?

Without a logbook, it becomes challenging to substantiate your claim, and you may not be able to claim the interest deduction for business use.

5. Is it worth refinancing my car loan to get a lower interest rate?

Refinancing can be beneficial if you secure a lower interest rate, reducing your overall loan costs. Consider consulting with Esteb and Co to explore refinancing options from their panel of over 83 lenders.

6. Are there any other car-related expenses I can claim?

Yes, other expenses such as fuel, maintenance, and depreciation can be claimed if they relate to business use. Consult a tax professional for comprehensive advice.

By understanding the eligibility criteria and following the correct steps, you can effectively claim interest on your car loan, potentially easing your financial burden. Remember, keeping detailed records and seeking professional advice are key to maximising your tax savings.