Sarah runs a graphic design business from her home in Brisbane. Every week she drives to client offices, picks up print samples, and drops off final artwork. Last financial year, she claimed $3,520 in vehicle deductions using the ATO cents per km method. That money went straight back into her business.
If you drive your car for work, you’re probably leaving money on the table at tax time. The ATO lets you claim vehicle expenses using two methods, and picking the right one could mean hundreds (or even thousands) of extra dollars back in your pocket.
Here’s everything you need to know about the current ATO cents per km rate, how to calculate your claim, and when switching to the logbook method might save you more.
Current ATO Cents Per Km Rate for 2025-26
The ATO cents per km rate for the 2025-26 income year (July 1, 2025 to June 30, 2026) is 88 cents per kilometre.
This single flat rate covers all your vehicle running costs. You don’t need to calculate individual expenses for fuel, registration, insurance, depreciation, or maintenance. The ATO bundles everything into that 88 cents.
ATO Cents Per Km Rates: Recent Years
| Income Year | Rate Per Km |
|---|---|
| 2025-26 | 88 cents |
| 2024-25 | 85 cents |
| 2023-24 | 85 cents |
| 2022-23 | 78 cents |
| 2021-22 | 72 cents |
| 2020-21 | 72 cents |
The rate has climbed steadily over the past few years, reflecting rising fuel prices, insurance costs, and general vehicle expenses across Australia.
What the Rate Covers
That 88 cents per kilometre accounts for:
- Fuel and oil
- Registration and insurance
- Depreciation in value
- Repairs and maintenance
- Tyre wear
Because the rate is all-inclusive, you cannot claim any of these expenses separately if you use the cents per km method. It’s one or the other.
How the Cents Per Km Method Works
The cents per km method is the simplest way to claim motor vehicle cents per km deductions. You multiply your business kilometres by the ATO rate. That’s it.
But there’s one important rule: you can only claim a maximum of 5,000 business kilometres per car per year.
Even if you drive 15,000 km for work, the cents per km method caps your claim at 5,000 km. This is the biggest limitation of this approach, and it’s why high-mileage workers often switch to the logbook method.
Cents Per Km Calculator: A Worked Example
Meet Tom, a sole trader electrician in Melbourne. He estimates he drove 4,200 business kilometres during the 2025-26 financial year visiting job sites across the suburbs.
Here’s how his claim works:
Tom’s Vehicle Deduction
- Business kilometres: 4,200 km
- ATO rate: 88 cents ($0.88)
- Calculation: 4,200 x $0.88
- Total claim: $3,696
That’s $3,696 Tom can deduct from his taxable income. If he’s in the 32.5% tax bracket, that puts roughly $1,201 back in his pocket at tax time.
Now, if Tom had driven 6,500 business kilometres, his claim would still be capped:
- Business kilometres driven: 6,500 km
- Maximum claimable: 5,000 km
- Calculation: 5,000 x $0.88
- Maximum claim: $4,400
The 5,000 km cap means $4,400 is the most anyone can claim per car using the cents per km method for 2025-26.
What Counts as Business Travel
You can claim kilometres for:
- Driving between two separate workplaces
- Travelling to meet clients or attend work sites
- Running work errands (picking up supplies, dropping off equipment)
- Travelling to training courses related to your work
- Driving to the bank or post office for business purposes
What Doesn’t Count
Your daily commute doesn’t count. Driving from home to your regular workplace and back is personal travel, not business travel. The ATO is strict on this point.
Other trips you cannot claim:
- Personal errands during a work trip
- Driving to social events, even if colleagues attend
- Travel that’s primarily private in nature
The exception: if your home is your principal place of business (like Sarah, our Brisbane designer), then trips from home to client sites typically qualify as business travel.
Logbook Method: The Alternative
If you drive more than 5,000 business kilometres per year, the logbook method could save you significantly more.
Instead of a flat rate, the logbook method lets you claim the actual business-use percentage of all your vehicle expenses. There’s no kilometre cap.
How the Logbook Method Works
- Keep a logbook for 12 continuous weeks. Record every trip – the date, odometer readings, kilometres driven, and whether it was business or personal.
- Calculate your business-use percentage. If you drove 3,000 km total during your logbook period and 1,800 km was for business, your business-use percentage is 60%.
- Apply that percentage to all vehicle expenses for the year. If your total car costs were $12,000, you’d claim $7,200 (60% of $12,000).
Your logbook stays valid for five years, as long as your circumstances don’t change significantly. If you change jobs, move house, or buy a different car, you’ll need a new 12-week logbook.
What Expenses You Can Claim
With the logbook method, you claim your business-use percentage of:
- Fuel and oil
- Registration
- Insurance
- Loan interest (on the car purchase)
- Depreciation
- Repairs, servicing, and maintenance
- Tyres
- Car wash costs
- Roadside assist memberships
- Tolls and parking (business-related)
You’ll need receipts for all of these. This is where keeping organised records makes a real difference. A tool like SparkReceipt’s receipt scanner lets you snap photos of fuel dockets and service invoices as you get them, so nothing goes missing before tax time.
When the Logbook Method Saves You More
The logbook method almost always wins when:
- You drive more than 5,000 business km per year
- Your vehicle has high running costs (fuel, insurance, repairs)
- Your business-use percentage is above 50%
- You have a newer or more expensive car with higher depreciation
For someone driving 20,000 business km a year with $15,000 in annual car costs and a 70% business-use percentage, the logbook method would yield a $10,500 deduction. The cents per km method would cap them at $4,400.
Cents Per Km vs Logbook Method
| Cents Per Km Method | Logbook Method | |
|---|---|---|
| ATO rate | 88 cents/km (2025-26) | N/A – based on actual costs |
| Km limit | 5,000 km per car per year | No limit |
| Max claim (2025-26) | $4,400 | No cap |
| Record keeping | Reasonable estimate of km | 12-week logbook + all receipts |
| Receipts needed | No | Yes, for all vehicle expenses |
| Valid period | Claim each year | Logbook valid for 5 years |
| Best for | Low-mileage workers (<5,000 km) | High-mileage workers (>5,000 km) |
| Complexity | Very simple | More involved |
| Flexibility | Fixed rate regardless of actual costs | Reflects your actual expenses |
The quick rule: If your business driving is under 5,000 km and you want simplicity, use cents per km. If you drive more than 5,000 km for work or your vehicle costs are high, the logbook method will likely put more money back in your pocket.
You can switch between methods each financial year. You’re not locked in.
Who Can Claim Vehicle Deductions
Several types of workers can claim ATO vehicle deductions.
Sole Traders and Self-Employed
If you run your own business, you can claim for any driving directly related to earning your business income. This includes visiting clients, attending industry events, and purchasing supplies. Check out our guide to sole trader tax deductions in Australia for a full breakdown of what you can claim.
Employees With Work-Related Travel
Employees can claim vehicle expenses when they drive their personal car for work purposes. This doesn’t include your regular commute, but it does cover things like:
- Driving between work locations
- Visiting clients on behalf of your employer
- Carrying bulky tools that can’t be stored at work
- Attending work conferences or training
Your employer needs to not have reimbursed you for these trips. If they pay you a per-km allowance, you still need to declare it as income and can then claim the deduction.
Rideshare and Delivery Drivers
If you drive for Uber, DiDi, Menulog, or similar platforms, your vehicle is central to your income. The logbook method is almost always the better choice for rideshare and delivery drivers because of the high kilometres involved.
One thing to note for rideshare drivers: you must register for GST regardless of your income level. The normal $75,000 GST threshold doesn’t apply to taxi and rideshare services – the threshold is $0.
Record Keeping Requirements
The ATO expects different levels of documentation depending on which method you choose.
For the Cents Per Km Method
You need a reasonable estimate of your business kilometres. The ATO doesn’t require a logbook for this method, but they can ask you to explain how you calculated your estimate.
Good approaches include:
- Noting regular trips and their distances
- Using Google Maps to verify common route distances
- Keeping a simple diary of business trips
- Using a mileage tracking app to log trips automatically
If the ATO audits your claim, “I just guessed” won’t hold up. Have a reasonable basis for your estimate, even if it’s informal.
For the Logbook Method
Record keeping for the logbook method is more involved. You need:
- A 12-week logbook recording every trip (business and personal) with dates, odometer readings, kilometres, and purpose
- Receipts for all vehicle expenses throughout the year (fuel, servicing, insurance, registration, and so on)
- Odometer readings at the start and end of the income year
This is where most people trip up. Keeping a year’s worth of fuel receipts, service invoices, and insurance documents organised can be painful, especially if you’re busy running a business.
SparkReceipt’s expense tracker can help here. Snap a photo of each receipt or forward the email confirmation, and the AI extracts the details automatically. When tax time arrives, export everything in one click. No more digging through glove boxes and desk drawers.
How Long to Keep Records
The ATO requires you to keep records for five years from the date you lodge your tax return. Digital copies are fine, as long as they’re legible and complete.
Check the ATO website for the most current rates and requirements.
Frequently Asked Questions
What is the ATO cents per km rate for 2025-26?
The ATO cents per km rate for the 2025-26 income year is 88 cents per kilometre. This rate applies from July 1, 2025 to June 30, 2026. It covers all vehicle running costs including fuel, insurance, registration, depreciation, and maintenance.
Can I claim more than 5,000 km using the cents per km method?
No. The cents per km method has a strict cap of 5,000 business kilometres per car per year. For 2025-26, this means the maximum claim is $4,400 (5,000 x $0.88). If you regularly drive more than 5,000 km for work, consider the logbook method instead, which has no kilometre limit.
Do I need receipts for the cents per km method?
You don’t need fuel or maintenance receipts for the cents per km method. However, you do need to be able to show how you calculated your business kilometres. Keep a record of your regular business trips, their distances, and frequency. The ATO may ask you to justify your estimate during an audit.
Can I switch between the cents per km and logbook methods?
Yes, you can choose a different method each financial year. You’re not locked into one approach. Many people use cents per km in years with low business driving and switch to the logbook method when their driving increases.
Is the daily commute from home to work claimable?
No. Travel between your home and your regular workplace is considered personal travel and is not deductible. The main exception is when your home is your base of operations for your business. In that case, trips from home to client sites or other work locations typically count as business travel.
How often do I need to redo my logbook?
Your logbook is valid for five years from the end of the income year you started it, as long as your work circumstances haven’t changed significantly. If you change jobs, your work locations change, or you buy a different car, you’ll need to complete a new 12-week logbook.
Claim Every Kilometre You’re Owed
Whether you use the cents per km method or the logbook method, the key is picking the right approach for your situation and keeping records that back up your claim.
For most workers who drive under 5,000 business km per year, the cents per km method at 88 cents is simple and effective. If you’re a tradie, sales rep, or rideshare driver clocking serious kilometres, the logbook method will almost certainly save you more.
Either way, tracking your expenses throughout the year beats scrambling to reconstruct everything in July. Start tracking your vehicle expenses with SparkReceipt – it’s free to get started, and your future self will thank you at tax time.
If you also work in the US and need to track American mileage, check out our IRS mileage rate guide for 2026.
This article is for informational purposes only and does not constitute tax, legal, or accounting advice. Consult a qualified tax professional for guidance specific to your situation.
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