Understand how work-related car expenses are treated in Australia, compare the ATO's cents-per-kilometre and logbook methods, calculate a potential deduction, and learn how to keep reliable mileage records throughout the financial year.
The 91¢ figure is only one part of the Australian tax system. The important question is first whether your journey is genuinely work-related, then which calculation method applies, and finally whether you have records that support the kilometres and expenses you are claiming.
Your result can be very different depending on whether you are an employee, sole trader, business owner, or use a company-provided car.
Not every kilometre driven for work is automatically deductible. The nature of the trip matters.
Eligible taxpayers may generally compare the cents-per-kilometre and logbook methods for qualifying cars.
You need to be able to demonstrate how your work-related kilometres and expenses were calculated.
From 1 July 2026, the ATO cents-per-kilometre rate for calculating eligible motor vehicle expenses is 91 cents per kilometre for the 2026–27 income year.
| Income year | Cents per km | Maximum under this method | What it represents |
|---|---|---|---|
| 2026–27 | 91¢ | 5,000 km per car | Work-related car expense deduction method |
| 2025–26 | 88¢ | 5,000 km per car | Previous income year |
| 2024–25 | 88¢ | 5,000 km per car | Previous income year |
| 2023–24 | 85¢ | 5,000 km per car | Previous income year |
Estimate the deduction under the ATO cents-per-kilometre method. This is a deduction estimate, not a guaranteed tax refund.
This is the simpler method. You calculate your eligible work-related kilometres and apply the ATO rate.
For 2026–27:
subject to the 5,000 km annual limit per car for this method.
You do not have to calculate every individual running cost for the cents-per-kilometre claim.
You should be able to explain and substantiate how you arrived at your work-related kilometres.
If your qualifying business travel exceeds 5,000 km, this method cannot simply be extended to every kilometre.
Suppose you drive 12,000 genuine business kilometres during the year. You cannot simply calculate 12,000 × $0.91 under the cents-per-kilometre method.
Under cents-per-kilometre:
5,000 × $0.91 = $4,550
The remaining kilometres do not become another cents-per-kilometre deduction under this method.
If you have substantial business use and significant actual vehicle costs, the logbook method may produce a different and potentially larger deduction, depending on your facts.
Understand logbook methodThe logbook method is more detailed. Instead of applying a flat rate to business kilometres, you calculate the percentage of the car's use that is work-related and apply that percentage to eligible actual car expenses.
First determine your work-related-use percentage:
This produces the work-related percentage used with eligible actual car expenses.
A valid logbook is designed to demonstrate a representative pattern of your vehicle use.
Keep a continuous logbook period of at least 12 weeks that represents your travel.
Record the date, destination, purpose, starting odometer, ending odometer and kilometres travelled.
Work out the proportion of total kilometres that were work-related.
Maintain opening and closing odometer readings for the relevant income years.
There is no universal “best” method. The financially better option depends on your kilometres, actual vehicle costs, business-use percentage and eligibility.
| Feature | Cents per kilometre | Logbook |
|---|---|---|
| 2026–27 rate | 91¢/km | No flat rate |
| 5,000 km limit | Yes, per car | No equivalent 5,000 km cap |
| Actual expenses | Not separately added for the same car claim | Work-related portion of eligible actual costs |
| Record keeping | Need evidence of business kilometres | Detailed logbook + expense records |
| Complexity | Lower | Higher |
| High business use | May be less attractive after 5,000 km | May be worth comparing |
The tax treatment starts with the journey itself. A kilometre is not deductible merely because you drove your car during a workday.
Travel between separate workplaces can be work-related where the relevant requirements are satisfied.
In some employment situations, home can qualify as a base of employment. This is fact-specific and should not be assumed merely because you work from home sometimes.
Special rules can apply where an employer requires you to transport bulky tools or equipment that cannot be left at work.
Employees need to distinguish between a tax deduction and money paid by their employer.
If you incur eligible work-related car expenses yourself and are not reimbursed for the same expense, you may be able to claim a deduction if the relevant requirements are satisfied.
An employer's car allowance or reimbursement can have different tax treatment depending on how it is structured. Do not automatically treat an employer payment as the same thing as the ATO 91¢ deduction rate.
One of the biggest sources of confusion is assuming that “91 cents per kilometre” means an employer must pay every employee 91 cents for every business kilometre.
A rate used by eligible taxpayers when calculating a work-related car expense deduction under the cents-per-kilometre method.
Money your employer pays to compensate you for business driving. The tax treatment depends on the arrangement.
A payment can have different payroll and income-tax consequences from a reimbursement.
If you operate a business as a sole trader, vehicle costs connected with earning your business income may be deductible, subject to the applicable rules and records.
If eligible, the 2026–27 91¢ rate can be used for up to 5,000 business kilometres per car under the cents-per-kilometre method.
You still need a reliable basis for determining your business kilometres.
The logbook method can be useful where the business-use percentage and actual vehicle expenses make it financially preferable.
The ATO's car-expense methods have a specific meaning of “car”. Some motorcycles, utes, trucks, minibuses and other vehicles can fall outside that definition.
Depending on the vehicle, you may need to use actual expense rules instead of the cents-per-kilometre or logbook methods designed for qualifying cars.
If a business provides a car to an employee and the car is available for private use, a completely different tax system can become relevant: Fringe Benefits Tax.
FBT is a tax paid by employers on certain non-cash benefits provided to employees or their associates in connection with employment.
Under relevant FBT valuation approaches, identifying business and private use of a vehicle can be important. Detailed mileage records can therefore become valuable evidence.
Uses the statutory formula and relevant factors such as the car's base value, statutory percentage and availability for private use.
Can involve actual operating costs and the proportion of private use. Logbook evidence can be important under this approach.
Employee contributions can affect the taxable value of a car fringe benefit under the applicable rules.
A novated lease can change who owns or leases the vehicle for tax purposes and can therefore change how the normal employee car-expense deduction rules apply.
Where an employer leases the vehicle and makes it available to the employee under a salary-sacrifice or novated-lease arrangement, the employee generally cannot simply treat the vehicle as personally owned for purposes of claiming the normal car-expense deduction.
Additional work-related costs such as eligible parking or tolls may have separate treatment depending on the circumstances.
At tax time, remembering that you “probably drove about 4,000 km for work” is very different from having a reliable history of the journeys that produced those kilometres.
When did the journey occur?
Where did the work-related journey take you?
Why was the journey made?
How many kilometres were travelled?
Keep appropriate opening and closing odometer records.
Keep relevant receipts and supporting records where required.
FirstMileage is built to help you create a reliable history of your actual journeys using GPS mileage tracking.
The goal is not to create kilometres that did not happen. The goal is to make sure genuine work-related travel is not forgotten, under-recorded or reconstructed inaccurately months later.
Frequent client visits and work journeys are easy to forget when recorded manually at the end of the year.
A live mileage history gives you a stronger starting point than an estimate based on memory.
Keeping records during the year is usually easier than reconstructing a full year's driving at tax time.
You own the car, make 2,500 eligible work-related kilometres and satisfy the relevant requirements.
2,500 × $0.91 = $2,275
This is the estimated deduction under the cents-per-kilometre method before considering your broader tax circumstances.
You have 4,800 eligible business kilometres.
4,800 × $0.91 = $4,368
You could compare this result with what the logbook method would produce if you are eligible for that method.
You drive 12,000 genuine business kilometres.
Cents/km result = $4,550
The 91¢ method does not create a $10,920 deduction. With high business use, comparing the logbook method can become particularly important.
Business use = 8,000 ÷ 20,000 = 40%.
Under a qualifying logbook approach, the work-related percentage can be applied to eligible actual car expenses.
This distinction is extremely important.
A deduction reduces the amount of income on which tax is calculated, assuming you are entitled to claim it.
The actual tax effect depends on your broader tax position, including your applicable marginal tax rate and other factors.
A $4,550 deduction multiplied by a hypothetical 30% marginal tax rate would produce approximately:
This is an illustration, not a guaranteed refund or final tax outcome.
Keep records that clearly identify which vehicle was used for each journey and apply the applicable rules to each car.
Depending on your circumstances, more than one car can create situations where different methods are relevant.
Special rules can apply where jointly owned vehicles are used by different owners for separate income-producing purposes.
A good mileage workflow starts on the first work trip of the financial year, not on the night before lodging your return.
Whether you're preparing for tax time, maintaining a business mileage history or simply need a reliable record of your journeys, FirstMileage helps you capture the trips as they happen.
Tax rules can change. Always check the current ATO guidance for your specific circumstances before lodging a tax return.
General information only: This page is an educational guide and is not tax, legal or financial advice. Tax treatment depends on your individual circumstances. Rules and rates can change. Check current Australian Taxation Office guidance or speak with a registered tax professional before making a tax claim.
Stop trying to reconstruct your business driving from memory. Use GPS mileage tracking to build your journey history throughout the year.
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