Car Expenses and Home Office Claims: What You Need to Know for 2025/26

Claiming car expenses and home office costs can make a real difference to your tax outcome — but they’re also two of the most common areas where mistakes are made. With the ATO continuing to focus on work-related deductions, it’s more important than ever to understand what you can claim and what records you need to keep for the 2025/26 financial year.

Here’s a practical overview to help you stay compliant and maximise your legitimate claims.

Car Expenses

If you use your own vehicle for work or business purposes, you may be entitled to claim a portion of your car expenses. However, it’s important to remember that travel between home and your regular place of work is generally not deductible.

Common deductible travel includes:

• Travelling between different work sites
  
• Visiting clients or suppliers
  
• Travelling from your workplace to another work-related location
  
• Business-related travel if you operate your own business
  

Claiming methods

For individuals and sole traders, there are two main methods:

Cents per kilometre method

• Claim up to the annual kilometre limit set by the ATO
  
• Covers all car running costs
  
• Requires a reasonable estimate of work-related kilometres (diaries or records are strongly recommended)
  

Logbook method

• Based on your business-use percentage
  
• Requires a 12-week logbook (valid for five years unless usage changes significantly)
  
• Allows you to claim a percentage of actual expenses such as fuel, servicing, insurance, registration, depreciation, and interest
  

Choosing the right method can make a significant difference, so it’s worth reviewing this each year.

Home Office Claims

With flexible and remote work continuing into 2025/26, home office claims remain relevant for many taxpayers.

To claim home office expenses, you must:

• Be working from home to perform your employment or business duties
  
• Incur additional running expenses as a result
  
• Keep appropriate records to support your claim
  

What you may be able to claim:

• Electricity and gas (heating, cooling, lighting)
  
• Internet and phone usage
  
• Office furniture and equipment (depreciation may apply)
  
• Stationery and computer consumables
  

Claiming options

Depending on your circumstances, you may be able to use:

• The fixed-rate method, which covers running costs such as power and internet, or
  
• The actual cost method, where you calculate and claim the work-related portion of each expense
  

Each method has different record-keeping requirements, so it’s important to choose the one that best suits your situation.

Record Keeping Is Key

The ATO places strong emphasis on substantiation. This means:

• Keeping receipts and invoices
  
• Maintaining logbooks and diaries where required
  
• Retaining records for the required period
  

Without proper records, claims may be reduced or denied.

How We Can Help

Car and home office claims can quickly become complex, especially if your work arrangements change during the year. We help our clients:

• Determine what can and can’t be claimed
  
• Choose the most appropriate claiming method
  
• Ensure records meet ATO requirements
  
• Maximise deductions while staying compliant
  

If you’re unsure about your car or home office claims for 2025/26, speak to us early — good advice now can prevent issues later and improve your tax outcome.

This information is general in nature and does not constitute personal tax advice.

Disclaimer: This newsletter contains general information only. No responsibility can be accepted for errors, omissions or possible misleading statements. No responsibility can be accepted for any action taken as a result of any information contained in these articles. It is not designed to be a substitute for professional advice and does not take into account your personal circumstances.