Claim Car Loan Interest? Unlock Savings Relief (2026)

You've just financed a new vehicle, and now you're wondering if there's a way to ease the financial burden. Specifically, you're asking, "Can I claim the interest on my car loan?" Navigating the intricacies of tax deductions in Australia can be daunting, but understanding them could save you a significant amount of money. Let's delve into the specifics of claiming car loan interest and explore the options available.

Understanding Car Loan Interest and Tax Deductions

When you take out a car loan, a portion of your monthly repayments goes towards paying the interest on that loan. In Australia, the ability to claim this interest as a tax deduction largely depends on how you use the vehicle. If your car is used for business purposes, you might be eligible to claim the interest as a tax deduction. However, if the car is solely for personal use, the interest is generally not deductible.

The Australian Taxation Office (ATO) allows deductions on car expenses if you use your vehicle to earn assessable income. This means that if you use your car for work-related activities, such as traveling between job sites or visiting clients, you could potentially claim the interest on your car loan.

Eligibility Criteria and Current Interest Rates

To claim the interest on your car loan, you must meet certain eligibility criteria. Here are the key considerations:

• Business Use Percentage: You must determine the percentage of your car's use that is related to earning income. This is crucial as you can only claim the interest proportionate to this business use percentage.
• Logbook Method: To substantiate your claim, maintaining a logbook for a continuous 12-week period is essential. The logbook helps calculate the work-related portion of the car's usage.
• Eligibility: Only the interest on loans for vehicles used to produce assessable income is deductible.

As of 2026, car loan interest rates in Australia typically range from 6.49% to 12%, depending on factors such as your credit score, loan term, and lender. With access to over 83 lenders, Esteb and Co can help you find competitive rates that best suit your needs.

Steps to Claim Car Loan Interest

1. Keep a Detailed Logbook: Record your car's business-related trips over a 12-week period to determine the business use percentage.
2. Calculate the Deductible Interest: Apply the business use percentage to the total interest paid over the financial year to find the deductible amount.
3. Maintain Supporting Documentation: Keep all relevant documents such as your loan agreement, interest statements, and logbook records.
4. Complete Your Tax Return: Include the deductible interest amount in your annual tax return under work-related car expenses.
5. Consult a Tax Professional: Consider seeking advice from a tax professional to ensure accuracy and compliance with ATO requirements.

Tips and Considerations

To maximise your tax deductions and ensure compliance, consider the following tips:

• Stay Organised: Keep meticulous records of your vehicle's use and all related financial documents.
• Regularly Update Your Logbook: If your business use percentage changes, update your logbook accordingly.
• Review Interest Rates: Periodically review your car loan interest rates. If you're paying too much, refinancing through Esteb and Co's extensive lender panel could save you money.
• Understand ATO Regulations: Familiarise yourself with the ATO's guidelines on claiming car expenses to avoid potential issues.

Frequently Asked Questions

1. Can I claim the full interest on my car loan?
   No, you can only claim the portion of the interest that corresponds to the business use percentage of your vehicle.
2. Does personal use affect my ability to claim interest?
   Yes, only the interest related to the business use of your car is deductible.
3. Is a logbook mandatory for claiming car loan interest?
   Yes, a logbook is necessary to substantiate the business use percentage of your vehicle.
4. Can I claim interest on a car loan if I'm self-employed?
   Yes, self-employed individuals can claim car loan interest if the vehicle is used for business purposes.
5. What happens if I don't maintain a logbook?
   Without a logbook, you may not be able to substantiate your claim, which could lead to disallowed deductions by the ATO.
6. How often should I update my logbook?
   Update your logbook whenever there is a significant change in your car's business use percentage.
7. Can Esteb and Co help me refinance my car loan?
   Yes, with access to 83+ lenders, Esteb and Co can assist in finding competitive refinancing options.