Vehicle Finance for Tradies: What You Can and Can’t Claim on Tax

Introduction

If you’re a tradie working hard on the tools, your vehicle isn’t just a ride—it’s a vital part of the job. Whether you’re upgrading your ute or buying your first work van, vehicle finance can help you secure the right wheels without draining your savings.

But how does tax come into it? Can you claim the full cost? What about GST or fuel? This article clears the air and explains what you can and can’t claim on tax when using vehicle finance in Australia.

Can I Claim the Full Cost of My Vehicle?

Not exactly. The ATO lets you claim depreciation and interest on financed vehicles—not the entire upfront purchase price (unless the vehicle qualifies for the instant asset write-off, which we’ll cover shortly).

If you lease the vehicle instead of purchasing it through a chattel mortgage or hire purchase, you may be able to deduct lease payments rather than depreciation.

Vehicle Finance Options for Tradies

Your choice of finance structure affects what you can claim:

Chattel Mortgage

1. You own the vehicle
2. May claim GST upfront
3. Deduct interest and depreciation
4. Good for GST-registered tradies

Hire Purchase

1. Ownership transfers at the end
2. Claim interest and depreciation
3. May not be suitable for all accounting methods

Finance Lease

1. Lender owns the vehicle
2. Deduct lease payments
3. Option to buy the vehicle at the end

For a full comparison, check out our Equipment Loan Comparison Guide.

What Can I Claim on Tax?

Here’s what most tradies can claim:

1. GST on the Purchase

If you’re registered for GST and use a chattel mortgage, you can typically claim the GST on the purchase price in your next BAS. You can’t claim GST if you’re not registered or if you’re using certain lease structures.

2. Interest on the Loan

Claimable under most loan structures when the vehicle is used for business purposes.

3. Depreciation

You can depreciate the vehicle over its useful life using either the diminishing value or prime cost method.

4. Running Costs

This includes:

1. Fuel
2. Repairs and servicing
3. Insurance
4. Registration
5. Loan fees

5. Instant Asset Write-Off or Temporary Full Expensing

Eligible small businesses can claim the full cost of a vehicle under the instant asset write-off or temporary full expensing scheme, subject to current thresholds and timing rules set by the ATO.

What Can’t I Claim?

1. Personal Use

If you use your work vehicle on weekends or for holidays, you’ll need to apportion that personal use and claim only the business-related percentage.

2. Loan Principal

You can claim the interest, but not the actual repayment of the principal loan amount.

3. Luxury Cars

The ATO limits claims for vehicles that exceed the luxury car tax threshold. As of 2024–25, that’s $76,950 for fuel-efficient vehicles and $69,152 for others. You’ll need to speak to your accountant if your new dual-cab ute crosses this line.

Logbooks and Proof

To claim vehicle expenses, the ATO requires you to maintain a logbook for a minimum of 12 continuous weeks to substantiate your business use. You’ll also need to keep:

1. Tax invoices
2. Loan and finance documents
3. Fuel receipts
4. Service records

Good record-keeping is essential—especially if you’re claiming a significant deduction.

Finance or Buy Outright?

For many tradies, financing a ute or van is smarter than paying upfront. It protects your cash flow, helps build credit, and opens up tax benefits—especially if your business is growing fast.

You can run the numbers yourself with our Equipment Finance Calculator or speak with a finance expert to get pre-approved.

Final Tip: Talk to Your Accountant

This article gives general guidance, but your tax obligations will depend on your structure (sole trader, company, etc.) and how your books are set up. A registered tax agent can help you claim everything you’re entitled to—and avoid costly mistakes.