I'm buying a car through the business — how much of it can I actually claim? The cap for 2026–27 is $69,883

You've been meaning to replace the car, the business is going well enough to justify it, and somewhere in the conversation the price stops being a spending decision and becomes a tax decision. Put it through the business. Claim it. That's the version most people arrive at the accountant's desk with.

There is a real deduction in there. But the thing that decides its size isn't the price, the finance or the badge — it's a fixed dollar figure that applies no matter what you paid, and a measurement on the compliance plate that most buyers have never looked at.

The number, and what happens to everything above it

The car limit for 2026–27 is $69,883. In the ATO's own words, this is the maximum value you can use to calculate depreciation on a vehicle where you use the vehicle for business purposes and first use or lease it in the 2026–27 income year.

The part that catches people is what becomes of the rest. Where the car limit applies, it is the maximum cost you can use to calculate the car's decline in value — and you can't claim the excess cost over the car limit under any other depreciation rules. Not spread over more years, not moved into a pool, not carried forward to be picked up later. On a car bought above the cap, that slice of the purchase price simply never turns into a deduction.

Sitting above that is luxury car tax. For 2026–27 the LCT threshold is $91,661 for fuel-efficient vehicles and $80,809 for all other luxury vehicles, and cars with an LCT value over the threshold attract an LCT rate of 33% — payable only on the amount that is over the threshold, on the GST-inclusive value. The line that matters for a business buyer is short: you can't claim a credit for any luxury car tax you've paid, even if you use the car for business purposes. (The definition of a fuel-efficient vehicle changed from 1 July 2025 under the Treasury Laws Amendment (Tax Incentives and Integrity) Act 2025, which also aligned how the two thresholds are indexed — worth checking rather than assuming for a hybrid or EV.)

Whether the cap applies to your vehicle is a number, not a category

The car limit applies to passenger vehicles — motorcycles and similar vehicles aside — that are designed to carry fewer than 9 passengers and a load less than one tonne. For income tax purposes cars are motor vehicles, four-wheel drives included, designed to carry both a load less than one tonne and fewer than 9 passengers. Other vehicles are the ones outside that: motorcycles, and vehicles designed to carry one tonne or more, such as a utility truck or panel van, or 9 passengers or more, such as a minivan. The cap also doesn't apply to vehicles modified for use by people with disability. Where it doesn't apply, you use the vehicle's actual cost to work out your depreciation deductions.

This is where "it's a ute, utes are exempt" gets expensive. One tonne is the vehicle's payload capacity, and it is worked out, not assumed: payload capacity equals gross vehicle mass, as specified on the compliance plate by the manufacturer, minus the basic kerb weight. Basic kerb weight is the vehicle with a full tank of fuel, oil and coolant, together with the spare wheel, tools including the jack, and factory-installed options — passengers, goods and accessories don't count towards it.

Two things follow. Every factory-installed option you tick pushes kerb weight up and payload down, which is exactly how a dual cab that "is over a tonne" in the brochure ends up under it in your driveway. And the answer is printed on a plate on the car you are actually buying, which makes this a five-minute check before you sign rather than an argument in September.

What the arithmetic looks like

Assume a GST-registered small business buys a passenger car in the 2026–27 year for $85,000 including GST, and it's used 70% for the business.

Because the price is above the car limit, the maximum GST credit is generally one-eleventh of the car limit — for 2026–27 that is $6,353. Take that out and the cost for depreciation purposes is $78,647, which is still above the cap, so the cost you can actually work with is $69,883. Apply the business-use share and $48,918 is what goes into the depreciation calculation. The roughly $8,764 sitting above the cap is the amount that can't be claimed under any depreciation rule.

If the business isn't registered for GST, you include the GST you paid in the asset's cost instead — but the cap still bites, so the most you can bring in is the car limit.

The instant asset write-off doesn't rescue a car

The hope behind "put it through the business" is usually an immediate deduction. That isn't how a car of this size lands. To use the instant asset write-off, an asset's full cost must be less than the relevant limit, and a $20,000 limit is nowhere near a car at the cap. Under the simplified depreciation rules the business-use amount goes into the small business pool instead, where it is deducted at 15% in the first year and 30% for each year after that. The deduction isn't lost — it's slow.

One footnote on that $20,000, since it comes up. The government announced it would be made permanent from 1 July 2026, but the measure sits in the Treasury Laws Amendment (Tax Reform No. 2) Bill 2026, which the Senate referred to its Economics Legislation Committee on 25 June 2026 with a reporting date of 13 August 2026. It is not law yet. For a car it changes nothing either way — the cost is far above $20,000 in both scenarios.

The half of it that has nothing to do with the cap

Only the business portion is claimable, and the ATO is direct about this being an area where we often see errors made. If you use a vehicle for both business and private use, you have to be able to correctly identify and justify the percentage you're claiming, with records to support it — a logbook or diary recording private versus business travel.

Two traps sit inside that percentage. Travelling between your home and your place of business is private use, unless you're a home-based business and the trip was for business purposes. And the private share isn't just non-deductible: fringe benefits tax may apply where a company or trust provides a vehicle to an employee or their associate. That is a separate tax with its own return, and it is the reason a car that looks efficient on the income tax side can be a poor deal once everything is counted.

Beyond depreciation, the running costs are ordinary business deductions on the business share: fuel and oil, repairs and servicing, interest on a motor vehicle loan, lease payments, insurance premiums and registration.

This is general information current as at July 2026, not advice about your business or a particular vehicle. The order that saves the most money is the one that happens before the paperwork: check the payload figure on the compliance plate of the car in front of you, check the price against the LCT threshold, and go in knowing that anything above $69,883 is spending rather than deduction. If you're weighing up buying versus leasing, or whether the car should sit in the company at all once FBT is in the picture, that is the conversation our service for companies, trusts and bookkeeping is built around — and if you're a sole trader, the income tax calculator on this site will show you what a deduction of this shape is actually worth at your marginal rate before you commit to the car.