Claiming Car Expenses: Cents per Kilometre or Logbook?

Which Method Is Better?

If you use your own car for work, choosing the right method for claiming your car

expenses can make a significant difference to your tax deduction.

For the 2025–26 income year, there are two main methods available: cents per

kilometre and the logbook method.

Neither is automatically better. The right choice depends on how much you use your

vehicle for work, what it costs to operate and the records you have maintained.

When Can You Claim Car Expenses?

Generally, you may be entitled to claim car expenses when you use your vehicle in

performing your work duties.

This can include travelling between workplaces or travelling somewhere specifically to perform your work.

However, ordinary travel between your home and your regular workplace is generally

considered private and isn't deductible.

Option 1: Cents per Kilometre

The cents per kilometre method is the simpler of the two options.

For 2025–26, the rate is 88 cents per eligible work-related kilometre, up to a

maximum of 5,000 kilometres per car.

That means the maximum deduction available under this method is $4,400.

From 1 July 2026, the rate increases to 91 cents per kilometre, providing a maximum

potential deduction of $4,550 for 2026–27.

The rate is designed to cover all of your vehicle costs, including:

• Fuel or electricity

• Registration

• Insurance

• Servicing and repairs

• Decline in value

You don't need to retain receipts for each of these individual expenses when using this

method.

However, you still need records showing how you calculated your work-related

kilometres and must be able to demonstrate that the travel was work-related.

Option 2: The Logbook Method

For people who use their car extensively for work, the logbook method may produce a

larger deduction.

Instead of using a fixed kilometre rate, this method allows you to claim the work

related percentage of your actual vehicle expenses.

These may include fuel or electricity, registration, insurance, servicing, repairs and

decline in value.

For example, if your valid logbook establishes that 70% of your vehicle use is work

related, you may generally claim 70% of eligible vehicle running costs.

The Trade-Off: More Records

The potential for a larger deduction comes with additional record-keeping

requirements.

Your logbook must generally cover at least 12 continuous weeks and be representative of your normal vehicle use.

It needs to record details of relevant journeys, including the purpose of the trip,

kilometres travelled and odometer readings.

You'll also need appropriate records supporting the actual vehicle expenses you're

claiming.

Without a valid logbook, you generally can't use the logbook method.

So, Which Method Should You Choose?

It depends.

If you have relatively low work-related vehicle use and want a straightforward method

with less record keeping, cents per kilometre may be sufficient.

If you drive extensively for work and have significant vehicle expenses, the logbook

method could produce a substantially larger deduction.

The important point is not to automatically choose the easiest method.

Where the records are available, comparing the potential deduction under both

methods can help determine which provides the better tax outcome.

At Lockwood & Ward, we can help you determine which method is appropriate and

ensure you're claiming the deductions you're entitled to while meeting the ATO's record keeping requirements.

If you're unsure which method to use for your 2026 tax return, speak to our team.

Lockwood and Ward Pty Limited | ABN 76 113 938 373

Level 9, 50 Clarence Street, Sydney NSW 2000 | Tel: (02) 9299 7044