Can you claim a rental car on tax in Australia?

Can you claim a rental car on your tax return?

Yes, for the part of the hire that's for work, if you paid for it yourself and weren't reimbursed. For employees, the ATO treats short-term car hire as a work-related travel expense, claimed at question D2 of the 2026 return alongside taxi and public transport fares, tolls and parking.^[1] Question D1, work-related car expenses, is for a car you owned, leased or hired under a hire-purchase agreement.^[1]

The difference matters because of how you work out the amount. The ATO's car-expense methods (cents per kilometre and logbook) are for a car you own or lease.^[3] For a vehicle that isn't yours, the ATO says you claim the actual costs of your work-related trips as a travel expense, and that those two methods can't be used.^[2]

This is general information from the ATO's pages, not tax advice. If your situation is unusual, ask the ATO or a registered tax agent.

Which trips in a hire car count as work?

The same trip rules apply whichever car you drive. You can't claim trips between home and your regular place of work, except in limited circumstances; the ATO treats them as private, because they get you to work rather than being part of it.^[4] That holds even if you work long hours or shifts, are on call, or have no public transport nearby.^[4]

What you can claim:^[4]

• Trips between two workplaces (neither of them your home), such as from your office to a client's site.
• Trips between your regular workplace and an alternative place of work, or from home to an alternative place of work.
• Home-to-work trips when your home is a base of employment, when you have to carry bulky tools or equipment that can't be stored at work, or when your work is itinerant, with a "web" of workplaces and no fixed one.

So a car hired to drive between sites, to visit clients or to carry equipment can be largely deductible. A car hired because your own is off the road, and used mostly to commute, usually isn't. A mixed month is common: the same hire car takes you to the office on Monday and to three client sites on Tuesday, and only Tuesday's driving counts.

How do you work out the deduction?

Add up what you actually paid for the hire and its running costs, then claim the work-related share.^[2] If some of the travel was private, only the work part counts.^[1] A record of your trips isn't strictly required, but the ATO says a logbook-style record is the easiest way to show your work-use percentage.^[2]

Tolls and parking for work trips are listed separately at D2,^[1] so record them as you go. If your employer pays you a car allowance, that allowance is assessable income and goes in your return.^[2]

What records do you need?

Keep the hire agreement and invoices, fuel, toll and parking receipts, and how you worked out the work share.^[2] If your total work-related expenses are over A$300, you need written evidence for all of them, and records generally have to be kept for 5 years from when you lodge.^[1]

• Write down each work trip: date, from, to, kilometres and the reason.
• Note the odometer at pickup and return; your total kilometres are the base for the percentage.
• Keep the toll statement or the rental company's toll recharge, which shows each toll's date and time.

Charges that can appear on a rental bill after you return the car (fuel, toll fees, late returns) are listed in hidden costs of car rental; they belong in your total if the hire was for work.

Sole traders and businesses

If you hire a car for your business, the ATO lists car hire fees, and the fuel, tolls and parking you pay while using a hire car for business purposes, among deductible business travel expenses.^[5] As for employees, only the business portion can be claimed.^[5]

The ATO treats travel between your home and your place of business as private use, unless you run a home-based business and the trip was for business.^[6] If you're entitled to GST credits, you claim the GST-exclusive amount of the expense as the deduction,^[5] so you'll want a tax invoice.

For a company or trust, the private-use share of a vehicle isn't deductible, and fringe benefits tax may apply where an employee uses the car privately,^[6] so a hire car given to staff for weekends as well as work needs more care than one used only on the job.

A car hired while your own business vehicle is being repaired may also be claimable from an insurer rather than through tax; see renting a car while yours is repaired.

Invoices for a Rentzy rental