How much of your new car can you claim?
For vehicles first used or leased in the 2026–27 financial year, the car limit is $69,883.
This is generally the maximum value that can be used when calculating tax depreciation deductions for a passenger vehicle, even if you paid more for the car.
So, if you're considering a vehicle that costs more than $69,883, the portion of the purchase price above the car limit will generally not attract depreciation deductions.
That doesn't mean buying a more expensive vehicle is necessarily the wrong decision. There may be plenty of practical or business reasons for choosing it. It simply means it's important to understand how much of the purchase price can actually be used when calculating your tax deductions.
If you use the vehicle for both business and personal purposes, you'll generally only be able to claim deductions for the business-use portion.
Keeping appropriate records, including a valid logbook and odometer readings, is also important to support your claims if they're reviewed by the ATO.
It's also worth checking which depreciation rules apply to your circumstances, including whether any simplified depreciation concessions are available.
There's also a limit on the GST you can claim
If your business is registered for GST, you may be entitled to claim GST credits when purchasing a business vehicle.
However, if the purchase price is above the car limit, the GST credit is also capped.
For the 2026–27 financial year, the maximum GST credit available for passenger vehicles is $6,353, which is one-eleventh of the $69,883 car limit.
Even if you spend considerably more on the vehicle, the GST credit will generally not increase beyond this amount.
There's also something worth remembering when it comes time to sell. While the GST credit on the original purchase may have been capped, you'll normally need to pay GST on the full sale price when the vehicle is sold.
For businesses, GST credits can provide a useful short-term cash flow benefit, so it's important to make sure they're claimed correctly and within the relevant time limits through your Business Activity Statement (BAS).
When does Luxury Car Tax come into the picture?
The Luxury Car Tax thresholds have also increased from 1 July 2026.
The new thresholds are:
- $91,661 for fuel-efficient vehicles
- $80,809 for all other vehicles
Where LCT applies, it is generally charged at 33% of the value above the relevant threshold.
If you're considering a higher-priced vehicle, these thresholds are worth checking before you buy.
Many fuel-efficient vehicles, including a range of hybrid and electric models, benefit from the higher threshold. Depending on the vehicle you choose, this could reduce the amount of LCT payable.
What should you consider before buying?
The purchase price is only one part of the decision.
Before buying or leasing a vehicle for your business, it may be worth considering:
- The total after-tax cost, including depreciation deductions, GST credits and any LCT
- Whether purchasing or leasing is more suitable for your circumstances
- How much the vehicle will be used for business
- What records you'll need to keep
- How the purchase fits with your broader cash flow and business plans
Whether you're replacing a work vehicle, expanding your fleet or purchasing a vehicle for client-facing activities, considering these factors before you buy can help you make a more informed decision.
Thinking about buying or leasing a business vehicle?
A business vehicle can be a significant investment. While tax shouldn't be the only reason you choose one vehicle over another, it can make a difference to the overall cost.
Understanding what you may be able to claim before you commit can also help you avoid unexpected costs later.
If you're considering buying or leasing a vehicle for your business, talk to the team at Lead Advisory Group before making a decision.
We can help you understand how the current car thresholds apply to your circumstances, look at the potential tax outcomes and help you make an informed decision that works for your business.
