Car & Travel Expense Deductions 2025-26: Cents Per KM vs Logbook Method

Car expenses are one of the largest work-related deduction categories in Australia — and also one of the most commonly over-claimed, which makes them a perennial ATO compliance focus. Before we even get to "which method should I use," there's a more fundamental question that trips up more people: is this travel even deductible in the first place?

This guide covers both, with worked examples comparing the cents-per-kilometre method against the logbook method so you can see exactly where the crossover point sits.

First: what car travel actually counts as work-related?

This is the single biggest source of incorrect claims, so it's worth getting right before anything else.

The basic rule: your commute doesn't count

Travel between your home and your regular workplace is considered private travel — full stop. It doesn't matter how far you live from work, whether you start before normal business hours, or whether you check emails on the way. The ATO is explicit and consistent on this point, and it's one of the first things checked in a review.

What does count

Despite the commuting rule, there are several genuinely common situations where car travel is deductible:

Travel between two separate workplaces — for example, if you work a shift at one location and then drive to a second job or a second site for the same employer on the same day
Travel to an alternative workplace that isn't your regular one — attending a training day at head office, visiting a different branch, or going to a client's premises for a meeting
Travel carrying bulky tools or equipment — if your employer requires you to transport bulky equipment essential to your work (and there's no secure place to leave it at your regular workplace), the trip from home can be deductible. This commonly applies to tradespeople, but the bar is "essential and bulky," not just "convenient to bring home"
Itinerant work — if your job genuinely requires you to travel to a series of different sites each day, with no fixed regular workplace (think travelling sales reps, some healthcare and community workers), travel from home may be deductible as part of your normal pattern of work
Work-related errands during the day — driving to the bank for work purposes, to pick up supplies, or between client appointments during work hours

If your situation involves any of the above, the rest of this guide is genuinely useful to you. If your car use is purely commuting, neither method will apply — and no amount of record-keeping changes that.

Method 1: Cents per kilometre

This is the simpler of the two methods, and the one most casual or occasional work-related drivers will use.

The 2025-26 rate

The cents-per-kilometre rate for the 2025-26 income year is 88 cents per kilometre — unchanged from 2024-25. This rate is set by the ATO and reviewed periodically; it was 85 cents in 2023-24 and 78 cents in 2022-23.

How it works

Multiply your total work-related kilometres for the year by 88 cents
The rate already includes everything — fuel, servicing, insurance, registration, and depreciation. You cannot claim any of these separately on top
Capped at 5,000 km per car, per income year — so the maximum possible claim under this method is 5,000 × $0.88 = $4,400

Record-keeping for cents per km

You don't need a formal logbook, but you do need to be able to show how you worked out your business kilometres — a diary, calendar entries, appointment records, or similar evidence of the trips you're claiming and their approximate distances. "I think I did about 3,500 km" without any supporting basis is not sufficient if the ATO asks.

Who this suits

This method is ideal if your work-related driving is occasional — site visits, client meetings, training days — and your total work kilometres are comfortably under 5,000 km for the year. It's quick, requires minimal paperwork, and avoids the ongoing logbook discipline.

Method 2: The logbook method

If you drive significantly more than 5,000 km for work, or your car's actual running costs are high relative to the cents-per-km cap, the logbook method removes the kilometre cap entirely — at the cost of considerably more record-keeping.

How the logbook works

You need to keep a logbook for a continuous 12-week period that's representative of your travel patterns across the year. For each trip during that period, record:

The date
The odometer reading at the start and end of the trip
The kilometres travelled
The reason for the trip (business or private)

From this 12-week sample, you calculate your business-use percentage — the proportion of your total driving (business + private) that was for work.

Applying the business-use percentage

Once you have your percentage, you apply it to all your car's running costs for the full year, including:

Fuel and oil
Registration and insurance
Servicing, repairs, and maintenance
Interest on a car loan (if applicable)
Depreciation (decline in value) of the car itself

The car limit and depreciation

For depreciation purposes, there's a car limit of $69,674 for 2025-26. If your car cost more than this, you can only calculate depreciation based on $69,674 — regardless of what you actually paid. This matters most for higher-value vehicles; for most mainstream cars, it's not a binding constraint.

Record-keeping for the logbook method

This is the trade-off for removing the 5,000 km cap:

The 12-week logbook itself, kept once every five years (or more often if your usage pattern changes significantly — see below)
Odometer readings at the start and end of each income year
Receipts for all running costs you're claiming — fuel, servicing, insurance, registration — for the full year, not just the 12-week period
Records to support the cost and purchase date of the vehicle for depreciation purposes

Worked example: comparing both methods

Scenario A — Sarah, a community support worker

Sarah drives between client homes during her workday, plus occasionally to head office for team meetings. Over the year, she estimates 4,200 km of work-related driving.

Cents per km: 4,200 × $0.88 = $3,696
Logbook: with a business-use percentage applied to her total running costs (say, $9,000 for the year — fuel, insurance, rego, servicing, depreciation), if her business-use percentage came out at roughly 35%, that's $9,000 × 35% = $3,150

For Sarah, cents per km gives a slightly better result with far less effort — no need to track every fuel receipt or maintain a 12-week logbook.

Scenario B — Marcus, a field-based sales representative

Marcus drives extensively between client sites across metro Melbourne, covering roughly 22,000 km of work-related driving in a year, in a car with relatively high running costs.

Cents per km: capped at 5,000 km × $0.88 = $4,400 (regardless of the other 17,000 km)
Logbook: if his 12-week sample shows an 80% business-use percentage, applied to total annual running costs of, say, $14,000 (fuel, insurance, rego, servicing, and depreciation on the car's value, allowing for the $69,674 limit if relevant) = $14,000 × 80% = $11,200

For Marcus, the logbook method is worth nearly $6,800 more — a significant difference that more than justifies the extra record-keeping.

Where's the rough crossover point?

As a general guide, once your work-related driving consistently exceeds roughly 5,000-6,000 km a year, or your car's running costs are unusually high relative to typical levels, it's worth running the numbers on a logbook. Below that, cents per km is usually simpler and comparable.

Use our Income Tax Calculator to see how the difference between these two methods translates into your actual refund at your marginal tax rate.

How long does a logbook last?

A logbook is valid for five years, provided your driving pattern stays broadly the same. You need a new 12-week logbook if:

You get a different car
Your job role or driving pattern changes significantly (e.g., you take on a new role with substantially more or less travel)
The current logbook is more than five years old

If your situation is genuinely stable, the same logbook (and the business-use percentage it produced) can be relied on for up to five years — you just keep updating your running cost records and odometer readings each year.

Common mistakes

Claiming the home-to-work commute — by far the most common error, and one of the easiest for the ATO to identify through patterns in claims
Claiming cents per km for one trip and logbook-based actual costs for another, on the same car in the same year — you must pick one method per car, per income year
Double-dipping on depreciation — if you use cents per km, depreciation is already included in the rate; you cannot also claim a separate decline-in-value deduction
Estimating logbook percentages without an actual 12-week record — "I'd say it's about 60% work use" doesn't meet the substantiation requirements
Forgetting that the 5,000 km cap applies per car — if you used two different cars for work during the year (e.g., you changed vehicles partway through), each car has its own 5,000 km cap, but you'll need separate records for each

Frequently asked questions

Can I claim parking and tolls separately under the cents-per-km method?

Yes. Parking fees and tolls incurred for work-related travel can generally be claimed separately from either method — they're not bundled into the 88c rate the way fuel and depreciation are.

What if I drive a ute or van rather than a car?

The cents-per-km method and the 5,000 km cap apply to "cars" as defined for tax purposes — broadly, vehicles designed to carry less than one tonne and fewer than nine passengers. Utes, vans, and trucks above this threshold are typically claimed under the actual cost method without the car-specific rules described here, based on the work-related portion of all running costs.

I share a car with my partner — can we both claim?

Each person can only claim their own work-related use of a car they own (or co-own). If you co-own a car, your claims would need to reflect your individual usage, with separate substantiation for each person's work-related kilometres.

Does the 5,000 km cents-per-km cap reset if I change jobs partway through the year?

No — the cap of 5,000 km applies per car, per income year, regardless of how many employers or roles you had during that year. All work-related kilometres for that car across the whole year count toward the single 5,000 km limit.

I started using the logbook method last year — do I need to redo it this year?

Not necessarily. If your logbook is less than five years old and your driving pattern hasn't materially changed, you can continue using the business-use percentage from your existing logbook — just keep your odometer readings and expense records up to date for the current year.

Is it worth doing a logbook if I'm close to the 5,000 km cap?

It depends on your car's running costs. If your work-use percentage from a logbook would be high (say, 60%+) and your annual running costs are substantial, even driving slightly over 5,000 km can make the logbook method worthwhile. If you're well under the cap with modest running costs, cents per km is usually simpler and similar in value.

This article is general information only and does not constitute tax advice. The cents-per-kilometre rate of 88 cents and the car limit of $69,674 apply to the 2025-26 income year as confirmed by the ATO. Rates and thresholds are reviewed periodically and may change in future years — always check the ATO website or speak with a registered tax agent for advice specific to your circumstances.

Try the related calculators

Income Tax Calculator