For mechanics, mobile repairers, car dealers, electricians, and other high-kilometre tradies, vehicle and equipment costs often represent some of the largest deductions available at tax time. However, they are also among the most misunderstood areas of taxation.
Tax experts at H&R Block emphasise that vehicle and equipment claims remain a valuable area for automotive trades, but they are also easy to get wrong if records are not properly maintained. With the Australian Taxation Office closely monitoring substantiation, apportionment, and over-claiming, the message as June 30 approaches is simple: claim what you are entitled to, but ensure you can support it.
What Can and Cannot Be Claimed?
The golden rule is that expenses must be incurred in earning assessable income and must not be private or domestic in nature. When a vehicle is used for work or business purposes, eligible deductions may include the business-use portion of:
- Fuel and oil.
- Servicing and repairs.
- Registration and insurance.
- Tyres and maintenance costs.
- Lease payments, where applicable.
- Interest on a car loan used for business purposes.
- Depreciation or decline in value of the vehicle, if claiming actual costs.
For automotive trades, travel between job sites, supplier runs, call-outs, transporting tools to multiple work locations, and client visits can often qualify. Sole traders using the cents-per-kilometre method can generally claim up to 5,000 business kilometres per car. For 2024–25 and 2025–26, the rate is 88 cents per kilometre, designed to cover running costs including fuel, insurance, maintenance, and depreciation. Those expenses cannot be claimed separately under this method.
Tools and Equipment
Mechanics and other trades may also be able to claim:
- Hand tools and specialist diagnostic equipment.
- Toolboxes and storage systems.
- Protective gear such as steel-capped boots or safety glasses, if occupation-specific.
- Repairs and maintenance of tools.
- Depreciation on higher-value equipment.
Mobile operators may also have legitimate claims relating to vehicle fit-outs, shelving, or business-use accessories, though capital treatment may apply.
What About a Dog?
The key test is whether the expense is directly related to earning your income. If you keep a dog to guard tools in a work vehicle, the ATO would generally view costs like food and vet bills as private in nature. Even if the dog is present at work sites or in a ute, it is still considered a domestic pet in most cases, so ongoing costs are not typically deductible. There may be very limited exceptions where an animal is genuinely a working animal used solely for business purposes, but that is a high bar and would require clear evidence. For most tradies or mechanics, it would be difficult to substantiate. As a rule of thumb, if the expense has a strong private component, the ATO is unlikely to allow a deduction.
What Generally Cannot Be Claimed?
This is where many claims go wrong. Common non-deductible items include:
- Ordinary home-to-work travel, so the daily commute.
- Private or family use of a business vehicle.
- Traffic fines and speeding penalties.
- Personal-use fuel or servicing costs.
- Double-dipping by claiming actual fuel, insurance, or repairs in addition to cents-per-kilometre claims.
- Capital improvements incorrectly claimed as immediate repairs.
A common error in the automotive sector is assuming that because a ute or van is used mostly for work, all costs are automatically deductible. If there is private use, apportionment is required.
Logbook vs Cents-Per-Kilometre: Which Method Suits?
This is often where the biggest tax savings are won or lost.
Cents-Per-Kilometre
This method suits taxpayers with:
- Relatively low to moderate business kilometres.
- Simpler records.
- Lower running costs.
- Mixed work use where keeping a logbook may be burdensome.
It offers simplicity, but the fixed rate can be less beneficial where fuel, servicing, or insurance costs are high.
Logbook Method
This is often better where:
- Business travel exceeds 5,000 km.
- Vehicles have high running costs.
- The vehicle is expensive to maintain.
- Work use is consistently high.
Under the logbook method, taxpayers can claim the business-use percentage of actual costs, based on a valid 12-week continuous logbook and supporting records. For many mobile operators and high-kilometre tradies, the logbook method can produce a materially larger deduction. An important detail often overlooked is that if operating through a company or trust, the cents-per-kilometre method may not be available, and actual costs may be required instead.
Red Flags the ATO Is Watching in 2025
Vehicle-related deductions consistently sit among the most reviewed claims each year, particularly where business and private use are not clearly separated. Areas likely to attract attention include:
- Overstated business kilometres: Claims sitting at or near the 5,000 km cap without supporting records can raise questions.
- Private travel dressed up as business use: Driving from home to the workshop is generally private travel.
- Double claiming: Claiming cents per kilometre and separate fuel receipts, claiming depreciation in addition to the cents-per-kilometre rate, or claiming reimbursed expenses again personally.
- Poor logbooks: Reconstructed or incomplete logbooks remain a major risk point. A logbook should be contemporaneous, not created at tax time.
- Sole trader and workshop apportionment issues: Where vehicles are used for both business and personal purposes, the ATO expects a defensible business-use percentage.
Frequently Declined or Incorrectly Claimed Deductions
Some deductions commonly get knocked back because taxpayers overreach. Examples include:
- Tools used partly privately, where private use is not excluded.
- Instant write-off misunderstandings, where not all purchases qualify.
- Protective clothing confusion, where ordinary workwear is incorrectly claimed.
- Vehicle modifications, such as bull bars or upgrades, which may be capital in nature.
What Else Should West Australians Keep in Mind?
WA’s geography can create larger legitimate travel claims than for many in the Eastern States, particularly in mining services, agricultural servicing, and regional mobile trades. That can support significant deductions, but also makes record-keeping even more important.
Practical EOFY Steps
- Review whether a logbook method now gives a better result than cents-per-kilometre.
- Update odometer records before June 30.
- Reconcile fuel, servicing, and insurance receipts.
- Review whether tools should be repaired, replaced, or depreciated.
- Check business and private apportionments before lodging.
For electric vehicles increasingly used in trade fleets, charging costs also need proper substantiation, whether via charging station records or home charging evidence.
