Car expenses at tax time: cents-per-km vs the logbook method

Car expenses are one of the most-claimed work deductions in Australia — and one the ATO adjusts most often. The rules aren't complicated, but the difference between the two claiming methods can be worth hundreds of dollars, and picking the wrong one leaves money on the table.

When a car trip actually counts

The home-to-work commute is private — it doesn't matter how far you drive or how early you start. What is deductible is work travel: between two jobs, from your workplace to a client or site, to pick up supplies, or to work training. There's one well-known exception to the commute rule — carrying bulky tools your job requires when there's no secure storage at work — but it's narrow and audited.

Method 1 — cents per kilometre

The simple option: claim a set rate for every business kilometre, up to 5,000 km per year. For 2025–26 the rate is 88 cents per km (rising to 91 cents for 2026–27), so the method caps out at about $4,400. It covers everything — fuel, servicing, rego, insurance, depreciation — in one number. You don't need receipts, but you do need a reasonable basis for the kilometres (a diary of typical work trips is enough).

Method 2 — the logbook

Keep a logbook for 12 continuous weeks that fairly represents your year's driving. It produces your work-use percentage, which you then apply to your actual running costs — fuel, insurance, rego, servicing, interest on the car loan, and depreciation. One logbook stays valid for five years unless your pattern changes. There's no 5,000 km ceiling, so this is where high-kilometre and higher-cost cars pull ahead.

Which one wins

Low work kilometres in a modest car? Cents-per-km is easier and usually enough. Drive a lot for work, or run an expensive vehicle? The logbook almost always beats the cap.

Take 14,000 work kilometres a year. Cents-per-km stops at 5,000 km — a $4,400 claim. A logbook showing 60% work use against $16,000 of real running costs and depreciation is a $9,600 claim. At a 32% marginal rate, that gap is worth about $1,660 more in your pocket — for the price of twelve weeks with a logbook app.

The records that make it stick

Odometer readings at the start and end of the year, the logbook itself (date, purpose, start/end reading), and receipts for the costs you're apportioning. Our tax deductions checklist walks the rest of your work-related claims, and the income tax calculator shows what a bigger deduction does to your take-home. General information only — not tax advice.