Tax Deduction for Car Expenses? 2025–26 Guide

Updated for the 2025–26 income year (tax returns lodged from 1 July 2026), with 2026–27 changes noted. Reviewed 19 October 2026.

Can I claim a tax deduction for my car expenses? Yes, but only for the work-related use of the car. If you drive your own car as part of doing your job, you can claim a deduction for that work travel using one of two ATO methods: the cents per kilometre method or the logbook method. Ordinary trips between home and your regular workplace are private and can't be claimed.

In this guide we cover:

1. Do I have to own the car? What if it's leased or hired?
2. Which trips count as work travel?
3. Cents per kilometre method (2025–26 and 2026–27 rates)
4. Logbook method
5. Vehicles that aren't "cars" (utes, vans, motorcycles)
6. Records you need
7. What changes from 1 July 2026

1. Do I have to own the car? What if it's leased or hired?

You can use the cents per kilometre or logbook method if you:

• own the car (even if it isn't registered in your name, as long as you can show you own it)
• lease the car directly from a finance company, or
• hire the car under a hire-purchase agreement.

If the car is provided under a salary-sacrifice or novated lease arrangement, you can't claim the car's running costs, because you don't own or lease it (your employer usually leases it and pays the running costs). You may still be able to claim work-related parking and tolls you pay yourself. If your employer reimburses your costs, you can't claim them.

2. Which trips count as work travel?

Driving from home to your regular workplace and back is private, even if you live a long way away or work early or late shifts. You can generally claim trips:

• directly between two separate jobs on the same day (as long as neither workplace is your home)
• from your regular workplace to an alternative workplace (for example, a client's premises or another site) and back, or on to home
• from home to an alternative workplace that isn't a regular workplace, then on to work or home
• when you have shifting places of work – no fixed workplace and you travel between sites each day
• between home and work when you must carry bulky tools or equipment that are essential for your job, are awkward to move without a vehicle, and there's no secure storage at work.

Carrying tools home by choice when secure storage is available doesn't count. For trade-specific examples, see our guide for tradies and construction workers.

3. Cents per kilometre method

This is the simplest method. You multiply your work kilometres by the ATO rate for that income year:

Key rules:

• You can claim a maximum of 5,000 work kilometres per car per year. If you use two eligible cars for work, the limit applies to each car.
• The rate covers all running costs – fuel, registration, insurance, servicing, repairs and depreciation – so you can't claim any of those on top.
• You don't need fuel receipts, but you do need a record showing how you worked out your work kilometres (for example, a diary or the myDeductions tool in the ATO app) and you need to be able to show you own the car.

Tip: your work kilometres can be a reasonable estimate (for example, a 20 km round trip each week for 48 weeks is 960 km), but keep a record of how you worked it out. Joint owners using the car for separate work can each claim up to 5,000 km.

Example (illustrative figures only): Priya visits clients' sites in her own car. Her diary shows 3,200 work kilometres for 2025–26. Her deduction is 3,200 × $0.88 = $2,816.

The 91c rate for 2026–27 is an 89c base rate plus a one-off 2c uplift for that year only, according to the ATO's 2026 determination.

4. Logbook method

The logbook method suits people who drive a lot for work, because there's no kilometre cap. You claim the work-use percentage of your actual car costs.

• Keep a logbook for at least 12 continuous weeks that represents your normal travel pattern. A valid logbook can generally be used for up to 5 years, unless your travel pattern changes.
• Record odometer readings at the start and end of the logbook period, and each year for the period you owned the car. In each later year you rely on the logbook, keep those odometer readings and your work-use percentage.
• Keep receipts for servicing, tyres, repairs, insurance, registration, lease payments and loan interest, plus a record of the purchase price and how you work out decline in value. For fuel and oil you can keep receipts or a reasonable estimate based on odometer readings, the car's fuel consumption and average fuel prices. Electric and hybrid cars need records of charging costs (commercial charging receipts, or bills and a calculation for home charging).
• Record each journey at the end of the trip or as soon as possible afterwards. If you use the logbook method for 2 or more cars, the logbooks must cover the same period.
• For depreciation, the cost you can use is capped at the car limit: $69,674 for 2025–26.

Example (illustrative figures only): Jordan's logbook shows 11,000 km travelled during the 12-week period, of which 6,600 km were for work. His work-use percentage is 6,600 ÷ 11,000 = 60%. His total car expenses for the year, including depreciation, are $9,000. He can claim $9,000 × 60% = $5,400.

5. Vehicles that aren't "cars"

The two methods above only apply to "cars". They don't apply to a motorcycle, a vehicle with a carrying capacity of one tonne or more (many utes and vans), or a vehicle that seats nine or more people including the driver. For those, you claim the actual work-related costs (fuel, insurance, repairs, interest, depreciation) with receipts and a record of your work use – a logbook is the easiest way to show it.

If you run a business as a sole trader or partnership, similar rules apply to business kilometres; companies and trusts claim actual costs. Our bookkeeping team can set up your accounts so vehicle costs are tracked correctly.

6. Records you need

• Cents per km: a diary or app record of work trips (date, purpose, kilometres) and proof you own the car.
• Logbook: the logbook, odometer records and receipts for every expense.
• Keep records for 5 years from when you lodge your return.

7. What changes from 1 July 2026

From the 2026–27 income year, eligible employees automatically get a standard deduction of up to $1,000 for work-related expenses. Work-related car expenses reduce that standard deduction dollar for dollar, so if your car claim is small, it may be simpler to take the standard deduction instead. If your car and other work expenses are well above $1,000, claim them in full with records. This doesn't affect your 2025–26 return. See our article on travel expenses for related rules.