When can I claim car expenses?

Broadly, tax deductions for car expenses (i.e. the costs you incur to own and operate a car) are available where you use your car for work-related trips, such as for travel between workplaces or to perform your work duties. The exception is ordinary commuting to and from work - such expenses cannot typically be claimed, as they’re considered private expenses.

Cents per kilometre method

The cents per kilometre method allows you to claim a fixed rate for each work-related kilometre you travel, up to a maximum of 5,000 km each year. This fixed rate per km covers all of your car expenses for a year, including decline in value, registration and insurance, maintenance, repairs and fuel costs.

For the 2025-26 tax year, the rate of deduction is 88 cents per kilometre, which means this tax time, the maximum potential amount of deduction is $4,400. (And keep in mind that the rate of deduction has been increased to 91 cents per km as of 1 July 2026, meaning a total potential deduction of $4,550 in the 2026-27 tax year).

One of the benefits of using the cents per kilometre method is that it’s relatively simple, as you don’t need to keep receipts for your fuel or car expenses. However, you do need to keep records to show how you’ve calculated your work-related kilometres (for example, a diary), and you also need to be able to show that you own the car you’re using for work.

Logbook method

If you have a lot of work-related car expenses and have the time, you might find that the logbook method gives you the best deduction.

The logbook method allows you to claim the work-related portion of your actual car expenses. This means that you can claim for a percentage of the actual expenses incurred on running costs such as fuel, electricity, servicing, registration, insurance and the decline in value, provided you’ve used the car in the course of your work.

However, as the potential deductions under the logbook method are higher, there are stricter record-keeping requirements to meet. This includes keeping a logbook, which allows the calculation of how much you can claim back, it must:

• cover at least 12 continuous weeks and be broadly representative of your travel,
• include the reason and purpose, as well as the destination of every work-related journey,
• the odometer reading at the start and end of each journey, 
• and the total kilometres travelled on the journey,
• include odometer readings for the start and end of the logbook period and the total kilometres travelled during that period.
• Each journey in your logbook must be made at the end of the journey or as soon as possible afterwards.

If you don't have a valid logbook, then unfortunately you cannot use the logbook method to claim car expenses, although the cents per km method may be available instead.

Which is better?

The answer to whether you should choose the logbook or cents per km method is very dependent on your personal situation. If you have light work-related car use and don’t love keeping extensive records, the cents per km method may be better suited to your needs, while those who use their car for work frequently may receive a higher deduction under the logbook method.

If you’re unsure which method is best for you, speak to a member of our team today.