5 Car Expense Deduction Mistakes That Can Get Your Tax Return a Second Look

Car expenses sit near the top of the ATO's watch list every tax time, and for good reason: they're easy to overclaim and, without the right records, hard to defend. Here are the mistakes that show up most often.

1. Claiming without records to back it up

This is the single biggest issue. It's not enough to have genuinely incurred a work-related car expense - you need to be able to show it: that you paid for it, and that it was work-related. That means receipts, invoices, and a contemporaneous log of trips, not a plausible-sounding number typed in at lodgement time.

2. Claiming close to the cents-per-km cap with nothing behind it

The cents-per-kilometre method doesn't require receipts, but it does require a reasonable basis for your kilometre count - a diary or trip log. Claiming at or near the 5,000 km cap year after year, with no record showing how that number was worked out, is one of the most commonly flagged patterns.

3. Treating a reconstructed logbook as a real one

A logbook filled in from memory after the fact isn't compliant, even if the final numbers look reasonable. Entries need to be made at the time of travel, covering 12 continuous weeks that represent your normal pattern - not assembled retrospectively to hit a number.

4. Claiming loan repayments as a running cost

If you have a personal car loan, the loan repayments themselves generally aren't deductible - but the interest component and depreciation may be, depending on your method and circumstances. Confusing "loan repayment" with "deductible cost" is a common and costly mix-up.

5. Claiming the commute

Driving from home to your regular workplace isn't deductible, no matter how far it is or what you do en route. Trips from home to a client site, between two workplaces, or carrying bulky work equipment can be different - but the everyday commute isn't a work-related trip.

Why the record beats the memory

Almost every one of these mistakes comes back to the same root cause: relying on memory or estimation instead of a real-time record. The ATO isn't primarily interested in whether your driving was work-related - it's interested in whether you can show it was.

How Odomly helps

Odomly logs each trip as it happens - odometer photo, purpose, and business/private classification - so there's a real, timestamped record behind every kilometre you claim, not a reconstruction. Reports are generated directly from that trip data, which is exactly the kind of substantiation the ATO expects to see if a claim is ever reviewed.

This article is general information, not tax advice. If you're unsure how these rules apply to your situation, speak with a registered tax agent.