Cents per kilometre or logbook? How to claim work-related car expenses

If you are an individual claiming work-related expenses for a car you own or lease, the ATO gives you exactly two methods: cents per kilometre or logbook. Everything else — utes and trucks built to carry a tonne or more, minibuses seating 9 or more, motorcycles, and cars you don’t actually own or lease — falls outside both methods and is claimed as actual costs under work-related travel expenses instead.

The choice is not locked in: you can use different methods for different cars, and change the method for the same car from year to year. What locks you out is records — without a valid logbook you cannot use the logbook method, though you may still be able to fall back on cents per kilometre.

One rate, one multiplication. You claim a set amount per work-related kilometre, up to 5,000 kilometres per car per year. The rate covers every car cost — decline in value, registration, insurance, maintenance, repairs and fuel — so nothing can be added on top, and decline in value cannot be claimed separately. If you and a joint owner use the same car for separate income-producing purposes, you can each claim up to 5,000 work-related kilometres.

Records are light but not zero. You don’t need receipts, but you must be able to show you own the car and how you worked out your work-related kilometres — a diary or the myDeductions tool in the ATO app both work. The ATO accepts a reasonable estimate: a 20 km weekly round trip across 48 working weeks, for example, supports a 960 km claim.

The logbook method claims the work-related percentage of your actual car expenses — fuel, oil, electricity, servicing, registration, insurance, lease payments, tyres, repairs, interest on a car loan, and decline in value — with no cap on work-related kilometres. Your work-use percentage is work-related kilometres in the logbook period, divided by total kilometres in that period, multiplied by 100.

• The logbook must cover at least 12 continuous weeks and be broadly representative of your travel.
• Every work journey needs its purpose, destination, odometer readings at the start and end, and total kilometres — entered at the end of the journey or as soon as possible afterwards.
• Record odometer readings for the start and end of the logbook period itself.
• A valid logbook lasts up to 5 years — but a new job or a new home that makes it unrepresentative means starting a fresh 12-week logbook.
• In each of the 4 years after the logbook year, keep odometer readings for the start and end of your ownership period plus your work-use percentage; claiming for 2 or more cars means a logbook for each car covering the same period.

Written evidence is required for the expenses themselves, with one concession: fuel and oil may be a reasonable estimate built from odometer readings, the car’s fuel consumption and average fuel prices for the year. You must also keep the car’s purchase price and your working for decline in value — the effective life used (generally 8 years for a car) and the method. Decline in value is only available if you owned the car or hired it under hire purchase, and the cost you can depreciate is capped by the car limit: $69,674 for a car first used in 2025-26 and $69,883 for 2026-27. The limit attaches to the car, not your share — joint purchasers of a car above the limit each work from half the limit.

Electric and hybrid cars carry their own evidence rules: receipts for commercial charging plus evidence of home charging costs such as an electricity bill, and hybrids need both fuel and electricity evidence. For a zero-emissions EV, home charging electricity can instead be worked out with the ATO’s odometer-based shortcut — 4.2 cents per kilometre for the 2022-23 to 2025-26 income years, with plug-in hybrids able to use the methodology from 2024-25. We could not verify a 2026-27 shortcut rate at our verification date of 12 July 2026 — check current ATO guidance before applying one to 2026-27 travel.

Both methods apply only to a car: a motor vehicle (excluding motorcycles and similar) designed to carry a load of less than one tonne and fewer than 9 passengers including the driver. Electric vehicles, plug-in hybrids and hybrids that meet this definition are cars. Vehicles outside the definition — and vehicles that aren’t yours — take the actual-costs route as work-related travel expenses.

Ownership matters too. You must own the car, lease it from a finance company, or hire it under hire purchase. A car under a salary sacrifice or novated lease arrangement is usually leased by your employer, so you cannot claim its running costs — though additional work-related costs such as parking and tolls remain claimable. A private family arrangement that effectively makes you the owner can qualify even if you are not the registered owner. Cars provided by employers sit in the fringe benefits tax system instead — our FBT return service covers that side.

Business structure draws its own line: sole traders and partnerships (with at least one individual partner) can use either the cents per kilometre or logbook method for cars, and must use actual costs for other vehicles — see our sole trader tax return service and the sole trader tax deductions guide. Companies and trusts must use the actual costs method regardless of vehicle type.

Whichever method you use, only work-related travel counts — trips between workplaces, or driving to perform your work duties. Trips between home and your regular place of work are generally not claimable except in limited circumstances; see the ATO’s guidance on car expenses for where the line falls. You must also have spent the money yourself without being reimbursed — and if your employer pays you a car expense allowance, that allowance must be included as assessable income in your return.

The methods themselves have not changed. Nothing in the Treasury Laws Amendment (Tax Reform No. 1) Act 2026 (No. 49 of 2026) — which received Royal Assent on 26 June 2026 and is law — alters the cents per kilometre method, the logbook method, the rates, the 5,000-kilometre cap, logbook validity, the car limit or the records each method requires. What changes, from the 2026-27 income year, is what a car claim now interacts with.

Schedule 4 of that Act inserts section 25-130 of the ITAA 1997 — a standard deduction for work-related expenses that applies to assessments for the 2026-27 income year and later. It is a floor, not a bonus. It begins at the lesser of $1,000 and your total assessable labour income, and is then reduced — dollar for dollar, but not below nil — by your deductions for the year under a list of provisions that expressly includes Division 28 car expenses (s 25-130(2)(d)), alongside section 8-1 deductions relating to labour income, section 25-100 travel between workplaces and section 25-10 repairs.

• Two repeals from 2026-27. Schedule 4 repeals section 28-180 (car expenses related to award transport payments) and Subdivision 900-I (award transport payments). If a claim has been built on either, it needs rebuilding for 2026-27 onwards.
• *What does not reduce the standard deduction* (s 25-130(3)): income protection, sickness and accident insurance premiums, and membership of a trade, business or professional association.
• Not this year’s return. Section 25-130 applies to assessments for 2026-27 and later — it has no effect on the 2025-26 return being lodged from July 2026.

Who can claim the standard deduction, exactly what reduces it, and how it sits against the substantiation changes in the same Schedule are set out in our companion resource on the standard deduction for work-related expenses. The ATO had not published administrative guidance on Schedule 4 at 13 July 2026, so no worked figure is offered here.

Neither method is universally better. Three variables decide it, and they are different for every driver.

• Kilometres. Above 5,000 work-related kilometres a year, cents per kilometre leaves distance on the table; the logbook method has no cap.
• Actual costs and work-use percentage. High running costs, loan interest or a substantial decline-in-value claim, multiplied by a strong work-use percentage, can outrun the set rate — a modest, cheap-to-run car driven mostly privately usually cannot.
• Records. The logbook method’s outcome is only available if the 12-week logbook, odometer readings and receipts actually exist. Without them, cents per kilometre may be the only method open to you.

Because you can switch methods year to year and per car, the practical approach is to keep records good enough to calculate both, then claim under whichever your evidence genuinely supports. Remember a deduction reduces your taxable income rather than your tax bill dollar for dollar — its cash value depends on your marginal tax rate, covered in our companion resource on individual tax rates for 2026-27.