If you drive your own car for work, the ATO gives you two ways to claim it back — and picking the wrong one can cost you hundreds of dollars. For 2026-27 the cents-per-kilometre rate has risen to 91 cents, which means a no-logbook claim of up to $4,550. But if you drive a lot or your car is expensive to run, the logbook method can beat that comfortably. Here is exactly how both methods work, the records each one needs, and the five myths the ATO itself has busted.
The quick answer
There are two methods, and you choose one per car, per year:
- Cents per kilometre — 91c × your work kilometres (max 5,000 km per car), no receipts, no logbook. Maximum deduction in 2026-27: $4,550. The rate already covers fuel, rego, insurance, repairs and depreciation, so you cannot add anything on top.
- Logbook method — keep a 12-week logbook to set your work-use percentage, then claim that percentage of every actual expense (fuel, rego, insurance, repairs, loan interest, depreciation). No kilometre cap, no dollar cap. More paperwork, potentially a much bigger claim.
You can use a different method for each car you own, and you can switch methods from one year to the next. What you cannot do is use both methods for the same car in the same year.
How the cents-per-kilometre method works
This is the method most Australians use because the record-keeping is light. The ATO sets the rate each income year. For 2026-27 the rate is 91 cents per work kilometre, capped at 5,000 work kilometres per car. The formula is one line:
Deduction = work kilometres × $0.91
Two details in that 91-cent figure are worth knowing, because almost no tax guide mentions them. The rate is made of a base 89 cents plus a temporary one-off uplift of 2 cents for the 2026-27 year only. When the ATO indexes the rate in future years, it will index the 89-cent base — so don’t treat 91 cents as the new permanent floor.
And here is the humbling part of the headline rate rise: going from 88 cents to 91 cents adds $150 to the maximum claim ($4,400 → $4,550). If your records don’t support the kilometres, the rate is irrelevant.
ATO cents-per-kilometre rates, recent years
| Income year | Rate | Max claim (5,000 km) |
|---|---|---|
| 2026-27 | 91c | $4,550 |
| 2025-26 | 88c | $4,400 |
| 2024-25 | 88c | $4,400 |
| 2023-24 | 85c | $4,250 |
| 2022-23 | 78c | $3,900 |
Worked example — Priya, a nurse visiting clinics. Priya drives 3,000 work kilometres in 2026-27 between hospitals and home visits. Her claim is 3,000 × $0.91 = $2,730. If she were lodging the 2025-26 return for the same travel, it would be 3,000 × $0.88 = $2,640 — a $90 difference for the rate change. She needs no fuel receipts, but she must keep a diary or use the myDeductions app in the ATO app to show how she worked out the 3,000 km. An automatic round-number claim of 5,000 km with nothing behind it is exactly the kind of claim the ATO disallows (see myth 2 below).
What “work kilometres” means
Your everyday drive between home and your regular workplace is private travel — you cannot claim it under either method, even if the trip is long or outside normal hours. What you can claim:
- Driving between two workplaces (office to a client’s site, hospital to hospital)
- Trips to work-related meetings, conferences, or training away from your usual workplace
- Picking up supplies or running work errands during the day
- Driving between home and an alternative workplace, and home to a client’s premises
There are three narrow exceptions where the commute itself can be claimed: genuinely itinerant work (shifting places of employment each day), a home that is a base of employment (you work from home and travel to clients), and carrying bulky tools or equipment where the items are essential, awkward to transport, and there is no secure storage at work. “I keep my laptop bag in the car” does not count as bulky equipment.
How the logbook method works
If cents-per-kilometre is a flat shortcut, the logbook method is the real thing: you claim your actual costs, apportioned to work use. It suits anyone who drives big distances or runs an expensive car, because there is no 5,000 km ceiling and no $4,550 ceiling.
Step 1 — keep a logbook for 12 continuous weeks that is broadly representative of your travel. Each work journey needs the date, start and end odometer readings, kilometres travelled, and the specific purpose (the ATO warns that “client visit” written vaguely is not enough to pass an audit). Include start/end odometer readings for the whole 12-week period.
Step 2 — work out your business-use percentage. Business-use % = (business km ÷ total km during the logbook period) × 100.
Step 3 — keep receipts for everything and claim the business-use percentage of each eligible cost: fuel and oil (or EV charging), registration, insurance, servicing and repairs, tyres, interest on a car loan, lease payments, and decline in value (depreciation). What you cannot claim: the car’s purchase price itself, loan principal repayments, parking fines, or private trips.
A completed logbook is valid for five years as long as your pattern of driving stays broadly the same. In each of the four following years you record the odometer reading at the start and end of the year and apply the same percentage. But if you change jobs, move house, or switch vehicles, the old logbook stops being representative and you must start a fresh 12 weeks — a stale logbook after a life change invalidates the method.
Worked example — Dan, a sales rep. Dan’s logbook shows 60% business use. His car’s real costs for the year: fuel $2,800, rego $1,050, insurance $1,900, servicing $1,250, loan interest $2,000, depreciation $3,000 — total $12,000. His deduction is $12,000 × 60% = $7,200, well above the $4,550 cents-per-kilometre ceiling. This is the usual tipping point: once actual costs and kilometres are high, the logbook wins.
Depreciation and the car limit
Depreciation (decline in value) is claimable only under the logbook method — under cents per kilometre it is already baked into the rate, and claiming it on top is one of the ATO’s top-five myths. A passenger car has an 8-year effective life: 25% per year on the diminishing-value method, or 12.5% on prime cost.
If your car cost more than the ATO’s car limit, depreciation is capped at the limit. For cars first used in the 2026-27 year the limit is $69,883. So a $80,000 car first used in 2026-27 depreciates on $69,883, not $80,000 — first-year diminishing-value deduction $69,883 × 25% = $17,471, then apportioned to business use (at Dan’s 60%: $10,482).
Which method pays you more?
Run the comparison before you commit to a year of record-keeping:
- Cents per kilometre usually wins if you drive 5,000 km or less for work, run a fuel-efficient car with low costs, and don’t want receipts and a logbook.
- The logbook usually wins if you drive more than 5,000 work km, your running costs are high (fuel-guzzler, high insurance, expensive servicing), or your car is new enough that depreciation is large.
The crossover, worked. Take a worker with $12,000 in real annual costs and 60% business use: logbook gives $7,200. To match that under cents per kilometre you would need 7,913 work kilometres ($7,200 ÷ $0.91) — impossible, because the cap is 5,000 km ($4,550). Flip it: $5,000 in real costs at 60% business use gives a $3,000 logbook claim, which cents per kilometre beats with 3,297 km of driving. Quick rule of thumb: if your business share of real costs exceeds $4,550, reach for the logbook.
Two flexibilities people miss: you may use a different method for each car in the same year, and you may switch methods between years. Started on cents per kilometre, changed jobs, now drive 15,000 km a year? Switch to a logbook next year.
The reimbursement shortfall most people miss
If your employer reimburses you for work travel, you can’t double-claim — but if the reimbursement is below the ATO rate, the gap is deductible. Say your employer pays 65c/km for 4,000 work kilometres: you’ve received $2,600, and you can claim the 26c shortfall × 4,000 km = $1,040 extra on your return (keeping the same records as a cents-per-kilometre claim).
Record-keeping rules that trip people up
- Cents per kilometre: no receipts, no logbook — but you must be able to show how you worked out the kilometres. A diary, calendar appointments, work rosters, or the myDeductions tool. An unexplained round 5,000 km is a red flag.
- Logbook method: receipts or written evidence for all expenses, plus the logbook, plus odometer readings at the start and end of every year you rely on the logbook. Keep everything for five years after the last income year you use them.
- Novated lease trap: if your car is under a novated lease through salary packaging, you don’t own the car — so you cannot claim car expenses at all under either method. The ATO receives data about novated leases and cross-checks claims. You can still claim unreimbursed work-related parking and tolls.
- Utes and 1-tonne+ vehicles: “car” for tax purposes means a load under one tonne and fewer than nine passengers. Motorbikes, 1-tonne+ utes and vans cannot use cents per kilometre at all — you claim actual expenses using logbook-style records. And a ute can still count as a “car”: the test is its designed load capacity, not the body style.
Electric vehicles: the new 5.47c home-charging rate
If you drive an EV for work and use the logbook method, the ATO lets you claim home charging with a shortcut instead of tracking kilowatt-hours: 5.47 cents per kilometre from 1 July 2026 for income-tax purposes (up from 4.20c under guideline PCG 2024/2). Worked: 15,000 km a year, 60% business use → 9,000 business km × $0.0547 = $492.30 in home-charging costs to feed into your logbook expenses. You need start-and-end-of-year odometer readings. If you mostly charge at commercial stations, keep those receipts instead — you can’t use the shortcut for home charging and then separately claim commercial charging on top.
Five myths the ATO wants you to stop believing
The ATO recently published its own myth-busting list for the cents-per-kilometre method. Paraphrased:
- “I can claim my drive to work.” No — home-to-work travel is private under every method, with only the three narrow exceptions above.
- “Everyone can just claim 5,000 km.” The 5,000 is a cap, not an entitlement. You need evidence of the car and how you worked out the kilometres.
- “My novated-lease car counts.” It doesn’t — you don’t own it, and the ATO has the data to check.
- “I can claim depreciation on top of the 91c.” No — decline in value is built into the rate. Separate depreciation is logbook-only.
- “What type of lease I have doesn’t matter.” A personal lease is fine; a novated lease kills the claim.
FAQ
Can I claim the 91c rate for the return I’m lodging now?
The return you lodge in 2026-27 covers the 2025-26 year — use 88c for that one. The 91c rate applies to travel from 1 July 2026, which you’ll lodge in 2027.
I drive for work and also rideshare/deliver on weekends — can I claim?
Genuinely work-related kilometres under either method can be claimed, but gig driving brings complications: the ATO may treat delivery driving as business income with different deduction rules, and cents-per-kilometre still needs the kilometre evidence. Get advice if your driving pattern is mixed gig/employee.
Do I need a logbook if I only use the cents-per-kilometre method?
No — but you need a diary, calendar entries, or the myDeductions app showing how you worked out your kilometres.
My logbook shows 100% business use. Is that a problem?
Only if it’s true and defensible — most cars do some private travel. The ATO looks harder at 100% claims, so make sure the logbook period is genuinely representative.
Can I claim tolls and parking?
Yes — work-related parking and tolls are claimable as separate work deductions under either method (they aren’t part of the 91c rate). Fines are never deductible.
What if I use my spouse’s car?
If there’s a genuine arrangement that makes you the owner or lessee, you can use either method; otherwise you can only claim actual costs like fuel in the work-related travel section of your return.
Bottom line
Cents per kilometre is the smart choice for modest, low-cost work driving — 91 cents a kilometre up to $4,550 with minimal records. The logbook method is the smart choice once your real costs are high or your kilometres pass 5,000. The most expensive mistake is neither method: it’s claiming a round number with no records. Work out your kilometres honestly, keep the diary or the logbook, and claim what’s yours. You can run the numbers on your tax position with the income tax calculator to see what the extra deduction is actually worth at your marginal rate, and read the full tax deductions checklist for the other claims workers miss.
