ATO Car Depreciation Cost Limit & Tax Thresholds for the 2024–2025 Financial Year

For Australian business owners and self-employed individuals, understanding the annual car tax thresholds set by the Australian Taxation Office (ATO) is critical for maximising vehicle deductions and ensuring compliance.

Car Depreation cost limit 2024- 2025

This guide provides the definitive limits for the 2024–2025 financial year concerning Income Tax (Depreciation), Goods and Services Tax (GST), and Luxury Car Tax (LCT).

1. The 2024–2025 Car Depreciation Cost Limit

The Car Limit is a cap imposed by the ATO on the maximum value of a passenger vehicle that can be used to calculate depreciation deductions. This limit is updated annually, effective from 1 July.

What is the 2024–25 Car Limit? (The $69,674 Cap)

The Car Depreciation Cost Limit for the 2024–2025 financial year is set at $69,674.

This figure represents the maximum cost base used for calculating depreciation (or claiming the Instant Asset Write-Off) on a passenger vehicle, provided:

• The vehicle is used for business purposes.

• The vehicle is first used or leased during the 2024–25 income year (1 July 2024 to 30 June 2025).

If you purchase a car for more than $69,674, you can only calculate the depreciation claimable based on the capped amount.

Substantiating Business Use (Logbook Requirement)

As a business owner, you are eligible to claim tax deductions for motor vehicle expenses incurred in the course of business operations.

Crucial Compliance Note: If a vehicle is used for both business and personal purposes, deductions (including depreciation) can only be claimed for the business-related portion. You must be able to substantiate the business usage percentage with appropriate records, typically a 12-week ATO-compliant logbook.

2. GST Implications of the Car Depreciation Limit

The Car Limit also directly impacts the maximum Goods and Services Tax (GST) credit a business can claim on a passenger vehicle purchase.

Maximum GST Credit Cap: $6,334

Maximum GST Credit (The $6,334 Cap)

If your GST-registered business purchases a car that exceeds the Car Limit ($69,674), the maximum GST credit you can claim (with certain exceptions) is one-eleventh (1/11th) of the Car Limit.

Financial Year	Car Depreciation Cost Limit	Maximum Claimable GST Credit (1/11th of Limit)
2024–2025	$69,674	$6,334
2023–2024	$68,108	$6,191

It is important to remember that you cannot claim a GST credit for any Luxury Car Tax (LCT) paid when purchasing a luxury vehicle, even if the car is used entirely for business purposes.

3. Luxury Car Tax (LCT) Thresholds 2024–2025

The LCT is a tax of 33% applied to the portion of a car’s value that exceeds the LCT threshold. This applies regardless of whether the car is used for business purposes.

LCT Thresholds Table (GST Inclusive)

Vehicle Type	LCT Threshold 2024–2025	Indexation Factor
Fuel-Efficient Vehicles	$91,387	Adjusted by the motor-vehicle purchase sub-group CPI.
All Other Luxury Vehicles	$80,567	Adjusted by the general 'All Groups' CPI increase.

Note: A fuel-efficient vehicle must have fuel consumption that does not exceed 7 litres per 100 kilometres (as a combined rating).

Compliance Warning on LCT Avoidance

The ATO has issued warnings regarding schemes designed to help purchasers avoid LCT. If you are considering purchasing a luxury vehicle, be cautious of third parties offering to purchase the vehicle on your behalf at a discount. Such schemes may expose you to significant risks, including potential penalties, insufficient insurance coverage, or issues with the vehicle being damaged or defective.

4. Key Exceptions: Commercial Vehicles and IAWO

A key distinction that many business owners overlook is the type of vehicle being purchased:

Vehicles Exempt from the Car Depreciation Limit

The Car Depreciation Limit ($69,674) DOES NOT apply to commercial vehicles that are not considered "cars" under the tax law. This typically includes:

• Vehicles designed to carry nine or more passengers.

• Vehicles (like certain Utes and vans) whose principal function is not carrying passengers. This is generally determined by a vehicle's load capacity exceeding one tonne.

If your business purchases a vehicle exempt from the Car Limit, you may be able to claim depreciation (or Instant Asset Write-Off) on the full cost of the vehicle.

Gordon Q.C Du & Associates are committed to ensuring your business claims every eligible deduction while maintaining ATO compliance. Contact us today for tailored advice on business advisory, accounting, bookkeeping, and payroll solutions.