Self-drive car rental, where a customer rents a vehicle and drives it themselves, has grown through both independent operators and aggregator platforms that connect car owners with renters. Whether you own one car listed on such a platform or run a small fleet, the rental income is business income, with a depreciation-heavy expense profile that's worth understanding.
For a self-drive rental business, the vehicles themselves are the core capital assets, and depreciation on these vehicles, computed at the prescribed rate for the vehicle category, is typically the single largest deductible expense, alongside maintenance and servicing costs, insurance premiums (rental vehicles often carry different and higher insurance costs than personal vehicles, given their commercial use and higher usage by multiple drivers), aggregator platform commissions if listed through a rental marketplace, cleaning and turnaround costs between rentals, and any loan interest if the vehicles were purchased with financing.
Self-drive rental businesses regularly deal with damage repair costs (sometimes recovered from renters' security deposits, sometimes not fully recovered), and traffic fines incurred by renters during their rental period (which the platform or operator may pass through to the renter, but which can sometimes become the operator's cost if not recovered). Repair costs genuinely incurred for the business's vehicles are deductible expenses; amounts recovered from renters for damage would generally be income (or a reduction of the expense, depending on how it's accounted for), and unrecovered fines or damages borne by the operator would be a cost of doing business, though the deductibility of certain types of penalty payments can have specific restrictions depending on their nature.
Renting out vehicles is a supply of service for GST purposes, with its own applicable rate, and GST registration would be required once the business's aggregate turnover crosses the applicable threshold, a compliance dimension separate from, but alongside, the income tax treatment of the rental income.
Where an individual starts by renting out a vehicle they previously used personally, switching it to use as a rental asset has implications for how its cost basis and depreciation are treated going forward (the asset's value at the point of conversion to business use becomes relevant for computing depreciation from that point), a transition worth getting right from a record-keeping perspective when starting a rental operation with an already-owned vehicle.