ATO Car Expenses for Sole Traders: Schedule B, Not D1

Business schedule vs D1: which section to use

The work-related car expenses section (item D1) on myTax is for employees who use their personal vehicle for work and are not fully reimbursed by their employer. If you run a sole trader business, your car expenses for that business are not claimed on D1.

Sole trader car expenses are claimed on the business schedule within myTax, the supplementary section for business and professional income. Car costs appear there alongside other business deductions such as phone, tools, and professional subscriptions.

If you are both an employee in one job and a sole trader running a separate business, you may have car expenses in both sections. Track each set of trips separately - employment-related trips on D1, sole trader business trips on the business schedule. Healthcare workers who mix payroll shifts with ABN agency work face exactly this split; our ATO car expenses for nurses and healthcare workers guide works through the employed-versus-contractor fork.

The two methods work the same way

Cents-per-km: 91 cents per business kilometre for 2026-27 (from 1 July 2026), capped at 5,000 km per car per financial year. Maximum deduction is $4,550 per car. For the 2025-26 year the rate was 88 cents with a $4,400 maximum.

Logbook: 12-week representative period, actual vehicle expenses for the year, business-use percentage applied to total costs. No cap on deductible kilometres.

You can calculate both methods and choose at tax time. You do not need to commit to one at the start of the financial year, provided you have the records to support whichever option you pick.

Business-use percentage for sole trader activities

For the logbook method, the business-use percentage comes from the trips in the 12-week logbook that are for the sole trader business specifically. If 70 percent of your kilometres during the 12 weeks were for the sole trader work and 30 percent were personal (including commuting to any employment), the business-use percentage for the sole trader deduction is 70 percent.

Employment trips are not included in the sole trader business-use percentage. Keep them logged separately so each set of records supports the correct part of the return.

The ATO examines business-use percentages on review. Very high percentages on vehicles that also have personal use can attract questions. The logbook must support whatever percentage you claim.

ABN and lodgement basics

You need an ABN to operate as a sole trader in Australia. Apply through the Australian Business Register at abr.gov.au. The business schedule on myTax asks for your ABN, business income from all clients, and deductible business expenses including car costs.

Sole trader returns are due by 31 October for the prior financial year if lodging yourself. Tax agents have extended deadlines. Car expense records should be kept for five years from the date of lodgement of the relevant return.