End of financial year is officially upon us. As of today, the 13th of June 2026, many Australian business owners are rushing to take advantage of EOFY car sales. Upgrading your business vehicle is a great way to reinvest in your company, but before you sign on the dotted line, you need to understand the new Australian Taxation Office thresholds taking effect on 1 July.
Whether you are looking at a sensible runaround, a heavy-duty work ute, or a fuel-efficient luxury car, the rules dictate exactly how much you can claim. Here is everything you need to know about the 2026-27 financial year car thresholds and how they apply to your business.
INCOME TAX DEPRECIATION LIMITS
When you buy a car for your business, you can claim a tax deduction for the motor vehicle expenses you incur. However, the ATO places a strict ceiling on the value you can use to calculate depreciation.
For the 2026-27 financial year, the car limit threshold is $69,883.
This means if you purchase a vehicle for $85,000, you can still only base your depreciation claim on the $69,883 maximum. To be eligible for this, you must use the vehicle for business purposes and first use or lease it in the 2026-27 income year.
It is also vital to remember the business use percentage rule. If you use the vehicle for weekend getaways as well as visiting clients, you cannot claim the entire cost. You are strictly limited to the business portion, and you must have the records, such as a compliant logbook, to back up your claims.
GOODS AND SERVICES TAX CREDITS
If your business is registered for GST, you will likely want to claim the GST credits on your new vehicle purchase. Much like depreciation, the ATO limits how much you can claim based on the car limit.
Generally, the maximum GST credit you can claim is one-eleventh of the car limit. For the 2026-27 year, the absolute maximum GST credit you can claim is $6,353. You calculate this simply by dividing the $69,883 limit by eleven.
There are a few important rules to remember here:
– You need to claim these GST credits on your Business Activity Statement within the standard 4-year time limit.
– If you buy a vehicle that exceeds the car limit, your GST claim does not increase; it remains capped at $6,353.
– There are certain exceptions for commercial vehicles, so it is always best to chat with us first.
LUXURY CAR TAX THRESHOLDS
If you are treating yourself to a luxury vehicle, you need to be aware of the Luxury Car Tax. This is a tax on cars that have a GST-inclusive value higher than the LCT threshold.
For 2026-27, the LCT threshold has increased in line with the motor vehicles consumer price index. The ATO offers a higher threshold for green vehicles to encourage environmentally friendly choices. The limits are:
– $91,661 for fuel-efficient vehicles
– $80,809 for all other luxury vehicles
It is incredibly important to note that you cannot claim a credit for any luxury car tax you have paid when you buy a luxury vehicle. This applies even if you use the vehicle 100 percent for business purposes.
Navigating car tax thresholds can be a complex process, but getting it right ensures you maximise your claims while staying compliant. If you are planning a vehicle purchase and want to know exactly how it will impact your tax position, reach out to the expert team at Nova Business Services. We can help you steer your business finances in the right direction.
Our team is here to support you and your business in many different ways, give us a call on 1800 668 225 or reply to this blog by clicking here to ask us any questions.
