Car Expenses: What Can You Claim?
Cars play a significant role in our day-to-day life, yet many individuals miss out on legitimate tax deductions simply because they are unsure what can be claimed or what records are required. In this article, we outline some of the most common work-related car deductions available to individuals, key record-keeping requirements and considerations to help you prepare for tax time with confidence.
When can you claim a deduction for your car?
For the year ending 30 June 2026, you may be able to claim a deduction for the work-related use of an eligible personal car if:
· you paid the vehicle expenses yourself and were not reimbursed by your employer;
· the expenses were incurred while earning your salary or wages;
· you owned, leased, or were purchasing the vehicle under a hire purchase agreement; and
· you kept the required records to support your claim.
The types of expenses you can claim will depend on the method you choose to calculate your deduction. These two methods are:
- Cents per kilometre method – suitable for taxpayers with simpler record-keeping requirements
- Logbook method – generally provides a more accurate deduction where detailed records are maintained
1. Cents Per Kilometre Method
The cents per kilometre method is the simpler of the two methods available for claiming work-related car expenses. Under this approach, you claim a predetermined cost rate for each work-related kilometre travelled. For the 2025-26 financial year, the rate is 88 cents per kilometre.
This rate is intended to cover all running costs associated with your vehicle, including fuel, servicing, repairs, registration, insurance, and depreciation. As a result, you do not need to keep receipts for these individual expenses. However, you must be able to demonstrate how you calculated your work-related kilometres. This can be done using records such as a diary, log, or the ATO's myDeductions tool within the ATO app.
What travel can be claimed?
Common examples of deductible work-related travel include:
- travelling directly between separate work places;
- travelling from your usual workplace to a client, meeting, training course, or alternative work location; and
- travelling between different clients or work locations during the workday.
Nevertheless, there are key non-deductible trips that you must be aware of. These include:
· normal travel between home and your regular workplace; and
· any private portion or detour of an otherwise work-related journey.
Exceptions may apply where your home is a genuine base of employment or you are required to transport essential bulky equipment between home and work, subject to specific conditions.
Things to consider
Claims are capped at 5,000 work-related kilometres per vehicle each year. Based on the 2025-26 rate, this limits the maximum deduction to $4,400. If you travel extensively for work, the logbook method may provide a larger deduction and could be worth considering.
2. The Logbook Method
The logbook method requires more record-keeping, but it can provide a more accurate deduction particularly if you use your vehicle extensively for work. Under this method, you calculate the work-related percentage of your vehicle use and apply that percentage to your eligible car expenses for the year.
What expenses can be claimed?
You can generally claim the work-related portion of expenses incurred in owning and operating your vehicle, including:
- fuel and oil;
- registration and insurance;
- servicing, cleaning, tyres, repairs and maintenance;
- lease payments; and
- interest on a car loan.
Some vehicle-related costs are not immediately deductible, including:
- the purchase price of the vehicle;
- repayments of the principal amount of a car loan;
- capital improvements made to the vehicle; and,
- private-use expenses.
However, you can claim the decline in value (depreciation) of the vehicle, including certain capital improvements, subject to the applicable car limit. For the 2025-26 financial year, the car limit is $69,674, which is the maximum value that can be used when calculating depreciation.
How is the work-related percentage calculated?
To use this method, you must keep a logbook covering a continuous 12-week period that accurately reflects your normal pattern of vehicle use. Your logbook should include:
- the date, destination and purpose of each work-related trip;
- the opening and closing odometer readings for each trip;
- the number of kilometres travelled; and
- the opening and closing odometer readings for the entire logbook period.
Your work-related percentage is calculated by dividing your work-related kilometres by the total kilometres travelled during the logbook period. This percentage can generally be used for up to five years, provided your vehicle use does not significantly change.
What records should you keep?
In addition to your logbook, you will need to keep records of deductible vehicle expenses, including receipts and invoices showing the supplier, amount, expense type and date. Bank or credit card statements alone are generally not sufficient. Vehicle purchase records must be retained to support depreciation claims.
Things to consider
The main disadvantage of the logbook method is the additional record-keeping required. However, unlike the cents per kilometre method, there is no cap on the deductions that can be claimed. For taxpayers with significant work-related vehicle use, the extra effort involved in maintaining a logbook may result in a substantially larger deduction.
Vehicles that are not cars
Not all vehicles qualify as a “car” for tax purposes. For example, motorcycles, or a ute with a carrying capacity of one tonne or more is not considered a car.
For these vehicles, the cents per kilometre and logbook methods are not available. Instead, you claim the actual vehicle expenses relating to work use. A logbook can still be useful for calculating and supporting the work-related percentage.
Which Method Is Right for You?
If your vehicle is an eligible car, you can choose between the cents per kilometre and logbook methods each income year. You can also use different methods for different vehicles or change methods in future years.
Keeping records of both your work-related kilometres and vehicle expenses allows you to compare the available deductions and choose the method that provides the greater deduction.
KEY TAKEAWAYS
By understanding the rules and maintaining the appropriate records, you can maximise your eligible car expense deductions while remaining compliant with ATO requirements. In summary:
- You may be able to claim a deduction for work-related car expenses if the expenses were incurred in earning your income and were not reimbursed by your employer.
- The cents per kilometre method is simple and requires less record-keeping, but claims are capped at 5,000 work-related kilometres per vehicle.
- The logbook method involves more detailed record-keeping but may result in a larger and more accurate deduction, particularly for those with significant work-related vehicle use.
Need help? If you’re unsure whether a deduction or expense applies to you, or what records you need to keep, contact our team.
General information only. This article does not constitute tax or financial advice and may not apply to your individual circumstances. Please contact our office for advice specific to your situation.
