Car Expenses: Cents Per Kilometre vs the Logbook Method

Car Expenses: Cents Per Kilometre vs the Logbook Method

Short answer: there are two ways to claim work-related car expenses. The cents per kilometre method pays a flat 88 cents per kilometre for 2025-26, capped at 5,000 work kilometres per car, with no receipts needed. The logbook method works out your real business-use percentage from a 12-week logbook and lets you claim that share of every car cost - including depreciation. If you drive a lot for work, the logbook usually wins. If you only do occasional work trips, cents per kilometre is simpler.

Every tax time, clients here in Mortdale ask the same thing: "Can I claim my car?" If you use your own car for work - and you are not just driving to and from the office - the answer is usually yes. The real question is which method gives you the bigger, safer claim. Here is the plain-English version, straight from the ATO rules.

First, what counts as a work trip

You can claim car expenses for trips made in the course of your job - driving between two workplaces, visiting clients, going to the bank for the business, or attending a meeting away from your usual office.

What you cannot claim is your normal home-to-work commute. The ATO treats getting yourself to work as private, even if you live in Penshurst and the office is in Mortdale, even with no public transport, even if you work back late. Limited exceptions exist (carrying bulky tools you cannot leave at work, or travelling between two separate jobs), but the standard daily drive to your regular workplace is never deductible.

Both methods apply to cars you own or lease. A "car" carries fewer than one tonne and fewer than nine passengers - so most sedans, hatches, wagons and SUVs. Larger utes and vans are claimed under different rules.

Method 1: Cents per kilometre

This is the simple option. You claim a flat rate for every work kilometre you travel, up to a cap.

• The 2025-26 rate is 88 cents per kilometre.
• You can claim a maximum of 5,000 work kilometres per car, per year. That is a top-end claim of 5,000 x 88c = $4,400.
• The rate already includes everything - fuel, servicing, registration, insurance and depreciation. You cannot add those costs on top.
• You do not need receipts. But you do need to be able to show how you worked out your kilometres - a reasonable, reliable basis such as a diary of your regular work trips. You cannot simply guess a round number.

If two people use the same car for work, each can claim up to 5,000 kilometres for their own work travel.

This method suits people with occasional or moderate work driving - a real estate assistant doing a few inspections a week, a tradie with the odd off-site job, or anyone who would struggle to keep a full logbook.

Method 2: The logbook method

This method takes more effort but can produce a much bigger claim if you drive heavily for work.

How it works

You keep a logbook for at least 12 continuous weeks. That 12-week stretch needs to be representative of how you normally drive across the year. From it you work out your business-use percentage - the share of your total kilometres that were for work.

You then claim that same percentage of your actual car costs: fuel, oil, servicing and repairs, registration, insurance, lease or interest costs, and depreciation (the decline in value of the car). For example, if your logbook shows 65% business use and your total running costs plus depreciation come to $14,000, you claim 65% = $9,100.

What you need to keep

• A logbook showing, for each trip in the 12 weeks: the date, the start and finish odometer readings, the kilometres travelled, and the reason for the trip.
• Odometer readings at the start and end of the income year (and when you start and stop using the logbook).
• Receipts and records for your actual expenses - this is the trade-off for the bigger claim. (Fuel and oil can be estimated from odometer readings if you prefer.)

The 5-year rule

A logbook is valid for five years, so you do not have to redo it every year. Once you have your business-use percentage, you can apply it for up to five years - as long as you keep that logbook and keep recording your odometer readings each year. If your work pattern changes meaningfully (a new role, a big shift in driving), you should start a fresh logbook sooner.

Which method suits whom

A quick rule of thumb: if your genuine work travel is comfortably under 5,000 kilometres a year, cents per kilometre is usually easier and the result is similar. Once you are well over that - or you have an expensive car with high running costs and depreciation - a logbook nearly always gives a bigger, fully supported claim. You can run the numbers both ways and choose the better one each year. To see how this fits with your other claims, our guide to work-related deductions covers the three golden rules that apply to everything.

A note for our St George clients

Plenty of the small-business owners, tradies and professionals we look after around Mortdale, Hurstville and the wider St George area do real work driving - site visits, client meetings, runs to suppliers. We see two common mistakes: trying to claim the daily commute (not allowed), and defaulting to cents per kilometre when a logbook would have doubled the claim. Twelve weeks of decent record-keeping can be worth a lot. If you are not sure which way to go, we sort that out in a quick chat at our individual tax return appointments, or as part of ongoing business advisory support.

FAQ

Can I claim driving from home to the office? No. Your normal trip between home and your regular workplace is private, even if it is a long drive or there is no public transport. Trips between two workplaces, or out to clients during the day, are claimable.

Do I need receipts for the cents per kilometre method? No receipts are required, but you must be able to show how you calculated your work kilometres - a diary or pattern of regular trips, not a guess. The cap is 5,000 work kilometres per car.

How often do I have to redo my logbook? A logbook is valid for five years, provided your circumstances stay broadly the same and you keep your annual odometer readings. You can start a new one any time, and you should if your work driving changes significantly.

Talk to us before you choose

The cheapest fix is choosing the right method before you lodge - not after. We can look at your driving, your car costs and your records, and tell you which method puts the most back in your pocket while keeping the ATO comfortable. Get in touch via our contact page or call the office on (02) 9580 1167.

This is general information, not personal advice. Tax rules and dates change - please check your situation with us or at ato.gov.au.

Sources (ATO)

• Cents per kilometre method - 88c per km for 2025-26, 5,000 km cap, no receipts but must show how km were worked out.
• Logbook method - 12 continuous weeks, valid 5 years, business-use percentage, odometer and expense records.
• Expenses for a car you own or lease - definition of a car and what each method covers.
• D1 Work-related car expenses 2025 - home-to-work travel and claim rules.