Cents Per Kilometre vs Logbook: Which Saves More?

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cents per kilometre vs logbook which method saves you more at tax time

Updated for the 2026–27 financial year

The ATO gives you two approved ways to claim car expenses for work: the cents per kilometre method and the logbook method. For the 2025–26 financial year the cents per kilometre rate is 88 cents per kilometre, capped at 5,000 work kilometres per car, which gives a maximum deduction of $4,400. From 1 July 2026 the rate is 91 cents, so the 2026–27 maximum is $4,550. The logbook method has no kilometre limit and lets you claim a percentage of your actual car costs, so it often produces a larger deduction if you drive a lot for work. The right choice depends on how far you drive and how much your car costs to run.

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The Two ATO Methods for Claiming Car Expenses

Claiming motor vehicle expenses is one of the most common tax deductions available to Australian small business owners, sole traders, and employees who use their vehicles for work. Whether you are a tradie driving between job sites, a consultant visiting clients, or a small business owner making deliveries, car costs can make up a substantial portion of your annual deductions.

In Australia, the ATO provides two approved methods for claiming motor vehicle expenses for business use:

  1. The cents per kilometre method.
  2. The logbook method.

Choosing the right method, keeping the right records, and applying the rules correctly will directly affect how much you can claim and how much tax you save. This article breaks down both methods clearly so you can confidently maximise your claim while staying on the right side of the ATO.

Why Choosing the Right Method Matters

The method you pick, the records you keep, and the rules you follow all feed directly into the size of your deduction and your audit risk. Many Australians either miss out on deductions because of poor record keeping or, worse, attract ATO scrutiny by over claiming. Missing records means missing deductions, while inflating your claim is the fastest way to draw attention from the ATO.

Whether you are self employed or an employee required to use your car for work, understanding both methods properly could put real money back into your pocket each year.

Are You Eligible to Claim Car Expenses?

To claim car expenses, you generally need to own or lease the car and use it for work. You cannot claim if your employer provides the car and pays for the fuel and running costs, if the costs have already been reimbursed by your employer, or if the car is under a salary sacrifice arrangement or a novated lease. In short, you can only claim costs you have genuinely paid for yourself and that have not been covered by someone else.

What Counts as an Eligible Car

For these two methods, an eligible car is one that carries a load of less than one tonne and fewer than nine passengers. Vehicles that cannot use these methods include motorcycles, vehicles that carry more than one tonne, and vehicles that hold more than nine passengers. If you use a vehicle outside this definition, different rules apply.

Which Trips Count as Work-Related Travel

You can claim work related travel when you drive to places that are not your regular workplace, when you have no fixed workplace, or when you carry bulky tools or equipment that cannot be securely stored at your workplace. Travel between two work sites also counts.

Travel from home to a regular workplace is private travel and cannot be claimed, even if you do some work on the way or take calls in the car. Be careful when deciding which trips to include, as private travel is one of the most common areas the ATO reviews.

Method 1: Cents Per Kilometre Method

The cents per kilometre method offers a straightforward way to claim car expenses without complex paperwork. It suits many Australian taxpayers who use their car for work only occasionally or moderately. You simply multiply a flat rate by the number of work related kilometres you travelled during the year, and you do not need to keep receipts for individual car costs.

Current Cents Per Kilometre Rate (2026-27, 2025-26 and 2024-25)

The ATO cents per kilometre rate is 91 cents per kilometre for the 2026–27 financial year. It was 88 cents for both 2025–26 and 2024–25, and 88 cents is the rate to use for the 2025–26 return you lodge in 2026. The ATO updates this rate each year based on the average fixed and variable costs of owning and running a vehicle, so it is worth checking the current figure before you lodge. You can read more about the current rate and how it applies at this overview of the 2025–26 cents per kilometre rate.

Prior Year Cents Per Kilometre Rates

When you claim for kilometres, you must use the rate for the year in which the driving took place. The rates for recent years are set out below, and you can find a fuller history of the rate at this historic cents per kilometre rate guide.

Financial year Cents per kilometre rate
2026–27 91 cents
2025–26 88 cents
2024–25 88 cents
2023–24 85 cents
2022–23 78 cents
2021–22 72 cents
2020–21 72 cents
2019–20 68 cents
2018–19 68 cents
2017–18 66 cents
2016–17 66 cents
2015–16 66 cents

How Many Kilometres You Can Claim

You can claim up to 5,000 work related kilometres per car, per year under this method. At 88 cents per kilometre (2025–26) the maximum deduction is $4,400; at 91 cents (2026–27) it is $4,550. Any distance you travel over the 5,000 kilometre cap cannot be claimed using the cents per kilometre method. If you drive more than 5,000 kilometres for work, you will usually be better off using the logbook method instead.

How to Calculate Your Cents Per Kilometre Claim

The formula is simple: work related kilometres multiplied by the rate.

Example: If you travel 4,500 kilometres for work at the 2025–26 rate of 88 cents, your deduction is 4,500 x 0.88 = $3,960. If you travel 4,000 kilometres at 88 cents, your deduction is 4,000 x 0.88 = $3,520. At the 2026–27 rate of 91 cents the same trips give $4,095 and $3,640.

What the Rate Covers

The cents per kilometre rate covers all of your running costs, including fuel, servicing, insurance, registration, and depreciation. Because the rate already bundles everything together, you cannot claim any of these expenses separately on top of it.

Claiming Kilometres Without a Logbook or Receipts

You do not need a logbook or receipts for individual car expenses under this method. You do, however, need to be able to show the ATO how you worked out your kilometres if asked. Your records should show the date, destination, purpose, and kilometres travelled for each trip. A work diary, client list, or appointment book can help you build a reasonable estimate.

Joint Ownership and the 5,000 km Cap

The 5,000 kilometre cap is calculated per vehicle. However, if you jointly own a car with someone and you each use it for separate income producing activities, each owner can deduct up to 5,000 kilometres. You can see a worked explanation of this at this guide to the cents per kilometre method.

Method 2: Logbook Method

The logbook method usually allows for a larger deduction, especially when your business use is significant. It lets you claim a percentage of your actual car expenses based on a business use percentage, and it has no kilometre limit. The trade off is more detailed record keeping. This method can be used by sole traders and partnerships claiming for a car, as well as employees who claim car expenses.

What Expenses You Can Claim

Under the logbook method you can claim the business portion of your actual running costs, including:

  • Fuel and oil.
  • Registration.
  • Insurance.
  • Servicing, repairs and maintenance.
  • Interest on finance for the car.
  • Depreciation (decline in value) of the vehicle.

Without a valid logbook you cannot claim these expenses, so the logbook is the key that unlocks the larger deduction.

How to Set Up and Keep a Valid ATO Logbook

To set up a valid logbook, follow these steps:

  1. Keep a logbook for at least 12 continuous weeks. This period must be representative of your travel throughout the year.
  2. Record the car’s details: make, model, engine capacity, and registration number.
  3. Record the odometer readings at the start and end of the logbook period, and the total kilometres travelled during the period.
  4. For each journey, record the start and end date, the reason for the trip, the odometer readings at the start and end, and the kilometres travelled. Two or more journeys in a row on the same day can be recorded as a single journey.
  5. Work out and record your business use percentage for the period.

Pre printed logbooks are available from stationery suppliers, and sole traders with simple tax affairs can create a logbook and record business trips using the myDeductions tool in the ATO app. You must also keep evidence of your actual fuel and oil costs, or the odometer readings used to estimate them, and evidence of all your other car expenses. The full requirements are explained on the ATO’s logbook method page.

How to Work Out Your Business-Use Percentage

To work out your business use percentage, divide the distance travelled for business by the total distance travelled, then multiply by 100. You then multiply your total car expenses by that percentage to get your deduction.

ATO example: Tim travelled 11,000 kilometres in total, of which 6,600 were for business. That gives a business use percentage of 60% (6,600 / 11,000 x 100). With total car expenses of $9,000, his deduction was $9,000 x 60% = $5,400.

How Car Depreciation Is Calculated

Using the logbook method, you can generally claim depreciation, also called decline in value, on the business portion of the car’s cost. If the vehicle is a car, a car cost limit applies to the amount you can use to work out your depreciation claim. This means there is a cap on the value used in the calculation, even if the car cost more than that limit.

How Long a Logbook Stays Valid

Each logbook is generally valid for five years, provided your work pattern does not change significantly. In the following years you still need to keep odometer readings at the start and end of each income year. If your circumstances change, such as a change in the type of work undertaken by your business, you may need to start a new logbook. You can start a new logbook at any time. For more on keeping a logbook valid, see this guide to vehicle logbooks.

Can You Claim if You Receive a Car Allowance?

Receiving a car allowance does not stop you from claiming car expenses. The allowance is treated as income, and you can still claim a deduction for your work related car use under one of the two methods. What you cannot do is claim costs that your employer has reimbursed or paid directly, because you have not actually borne those costs yourself. So the allowance and your deduction are separate things: one is income, the other is a deduction.

Cents Per Kilometre vs Logbook: Which Saves You More?

The best method depends on how much you drive for work and how high your actual car costs are. You must use one method per car per year and you cannot mix the two; for example, you cannot claim fuel under the logbook method and kilometres under the cents per kilometre method in the same year for the same car.

Feature Cents Per Kilometre Logbook Method
Record keeping Minimal, no receipts needed Detailed: 12 week logbook plus receipts
Maximum claimable kilometres 5,000 km per car No limit
Expense coverage Flat rate per kilometre Business portion of all actual car costs
Ideal for Low or irregular business use High and consistent business use
Claim size Often smaller, capped at $4,400 (2025–26) or $4,550 (2026–27) Potentially larger, depending on costs and use percentage

As a general guide, the cents per kilometre method suits people who drive 5,000 work kilometres or less and want simple records. The logbook method suits people who drive more than 5,000 kilometres for work or who have high actual running costs, because it can produce a much larger deduction.

Record Keeping and How Long to Keep Records

Car expenses are claimed at Item D1 on your tax return. Whichever method you use, you must keep your trip records and any receipts for five years after lodging your tax return, because the ATO can audit you up to five years after lodgement. Keeping clear, organised records is the simplest way to protect your deduction if the ATO ever asks how you worked out your claim. You can read a practical summary of these rules in this guide to keeping a valid logbook.

Get the Right Method and Maximise Your Claim

Claiming car expenses comes down to two clear choices. The cents per kilometre method is simple, requires no receipts, and is capped at 5,000 kilometres and a $4,400 deduction for 2025–26 ($4,550 for 2026–27). The logbook method takes more effort but has no kilometre limit and lets you claim the business portion of your actual costs, which often results in a bigger deduction for heavy work users.

Choosing the correct method and keeping compliant records can put real money back in your pocket while keeping you on the right side of the ATO. Everyone’s situation is different, and matters like shared vehicles, multiple business owners, car allowances, and depreciation can quickly become complex. If you would like tailored advice on which method works best for you and how to maximise your claim, the team at Tax Window can help.

Artur Osadchiy

About The Author: Artur Osadchiy

Artur is a Certified Practising Accountant with over 30 years’ experience working as a trusted advisor to 600+ clients across Australia. Based in Melbourne, he started Tax Window with his wife Marina in 2009 and leads the firm’s tax and accounting team. In his free time, Artur enjoys watching the AFL (go Kangas!) and spending time with family.

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