A recent Gran Turismo 5 patch now brings car damage for online races. The 1.03 update is available now, and the changes can be seen when setting up an online race. Now, you can choose from a range of three different damage settings. These settings include no damage, light damage and heavy damage.
Unfortunately, at the moment these changes are only for the online component of the game. The single-player ‘My GT’ section of the game does feature damage, but currently, there are no scaleable options like there is in the online modes.