Car Loan as Business Expense? Unlock Tax Relief (2026)

Opening paragraph: Owning a car can be a significant expense, especially if you’re running a business. If you’re like many Australian business owners, you might be wondering: can you claim a car loan as a business expense? Navigating the tax implications and financial benefits can be daunting, but understanding how to effectively manage your car expenses can lead to considerable savings. Let's delve into the details and explore the opportunities available to you.

Understanding Claiming Car Loan as a Business Expense

To claim a car loan as a business expense in Australia, it's essential to understand the basics of how vehicle expenses work for businesses. Generally, you can claim deductions for expenses related to the business use of your vehicle. This includes interest on car loans, depreciation, and running costs like fuel and maintenance. However, the portion you can claim must be directly related to business use, which means personal use must be excluded. This requires careful record-keeping and an understanding of your vehicle's business usage percentage.

Current Interest Rates and Options for Business Car Loans

In 2026, the market for car loans in Australia offers a range of interest rates and options tailored to business needs. The interest rates for business car loans typically range between 6.49% and 12%, depending on factors such as the lender, the creditworthiness of the business, and the loan term. Here is a comparison of some popular lenders available through Esteb and Co, which has access to over 83 lenders:

Lender	Interest Rate Range	Loan Term Options
Lender A	6.49% - 8.5%	1 to 5 years
Lender B	7% - 9.75%	2 to 7 years
Lender C	8% - 12%	3 to 5 years

Eligibility for these loans generally requires a good credit history, proof of business income, and a demonstrated need for the vehicle in business operations. It's crucial to compare options and consult with a financial advisor to ensure you choose the best loan for your needs.

Steps to Claiming Car Loan as a Business Expense

1. **Determine Business Use Percentage**: Keep a logbook for at least 12 weeks to establish the percentage of time your vehicle is used for business purposes. This will form the basis of your claims. 2. **Calculate Deductible Interest**: Based on the business use percentage, calculate the portion of your car loan interest that is deductible. 3. **Claiming Depreciation**: Use either the prime cost or diminishing value method to calculate depreciation on the business portion of your vehicle. 4. **Record Keeping**: Maintain comprehensive records of all expenses, including loan statements, interest payments, and running costs. 5. **Lodge Your Claim**: Include your deductions in your annual tax return, ensuring all calculations are accurate and documentation is complete.

Tips and Considerations for Claiming Car Loan Expenses

- **Consult a Tax Professional**: Given the complexity of tax laws, consulting with a tax professional can ensure you're maximising your deductions while staying compliant with ATO regulations. - **Regularly Update Your Logbook**: Keeping an up-to-date logbook helps in accurately determining the business use percentage and can protect you during audits. - **Consider GST Implications**: If your business is GST-registered, you may be able to claim GST credits on the purchase and running costs of your vehicle. - **Review Loan Terms Regularly**: With fluctuating interest rates, reviewing your loan terms can help you decide if refinancing could be beneficial. - **Use Esteb and Co’s Services**: Leverage the expertise and lender access of Esteb and Co to find competitive car loan rates and terms that suit your business needs.

Frequently Asked Questions

1. **Can I claim the full cost of my car loan as a business expense?** No, you can only claim the portion of your car loan expenses that relates to business use. 2. **How do I prove the business use of my vehicle?** A logbook detailing business trips and a record of kilometres travelled will help establish business use. 3. **What if my vehicle is used for both personal and business purposes?** Only the percentage of use related to business activities can be claimed as a deduction. 4. **What types of vehicles qualify for business expense claims?** Typically, any vehicle used for business purposes can qualify, but eligibility may vary based on specific circumstances. 5. **Can I claim depreciation on my vehicle?** Yes, you can claim depreciation on the business portion of your vehicle, calculated using either the prime cost or diminishing value method. 6. **Is it better to lease or buy a car for business purposes?** This depends on your business cash flow, tax strategy, and long-term vehicle needs. Consulting a financial advisor can help determine the best option. 7. **Are there any changes in tax laws for vehicles in 2026?** Tax laws can change, so it's important to stay updated with the ATO or consult a tax professional for the latest information.