Using a car for work can create a legitimate tax deduction, but only when the travel is connected to earning income and supported by the right records.

Car expenses are also an area where mistakes are common. Some people claim private trips, choose a method without comparing the result, lose receipts or try to recreate their travel at tax time.

The biggest mistake is not always claiming too much. Sometimes it is failing to keep enough evidence to support a genuine deduction.

This guide explains the Australian Taxation Office rules in plain English and shows how a digital tool such as CarSavvy can make trip and expense tracking easier.

This article was prepared by Latitude Accountants in collaboration with CarSavvy. It provides general information only. Your position will depend on your structure, vehicle, travel and records.

Do car expense rules change between Australian states?

Income tax and fringe benefits tax are federal taxes. The general rules in this guide apply across Australia, including every state and territory.

Registration, insurance, tolls and other vehicle costs may vary by location. The federal tax treatment generally depends on how the vehicle is used and which rules apply.

Who can use the cents per kilometre and logbook methods?

The first step is identifying who owns or leases the vehicle and which business structure is claiming the expense.

Employees, individuals and sole traders may generally use either the cents per kilometre method or the logbook method for an eligible car they own or lease. Some partnerships may also use these methods where at least one partner is an individual.

Companies and trusts generally claim the actual costs connected with business use. They do not simply apply the individual cents per kilometre method to a company owned car.

Company vehicles may also create fringe benefits tax obligations when they are available for private use by an employee or director.

These methods generally apply to a motor vehicle designed to carry fewer than nine passengers and a load of less than one tonne. Different rules can apply to motorcycles, vans and heavier vehicles.

What car trips can you claim?

You can generally claim travel required to perform your work or carry on your business.

This may include travel:

1. Between separate workplaces.
2. From your regular workplace to a client, supplier or job site.
3. Between customer appointments or business locations.
4. To a temporary alternative workplace where the relevant conditions are satisfied.
5. While performing genuinely itinerant work.

Travel between home and a regular workplace is generally private, even where the trip is long, outside normal working hours or there is limited public transport available.

Limited exceptions can apply for itinerant work, a genuine employment base at home, or required transport of bulky equipment that cannot be securely stored at work.

These exceptions are narrow and should not be assumed because someone carries a laptop, uniform or small tools.

What is the cents per kilometre method for 2026?

From 1 July 2026, the rate is 91 cents for each eligible business or work related kilometre. This applies to the 2026 to 2027 income year.

The method is capped at 5,000 eligible kilometres for each car. The maximum claim is therefore $4,550 for one car.

The rate covers relevant car running costs, including:

1. Fuel.
2. Registration.
3. Insurance.
4. Servicing.
5. Repairs.
6. Decline in value.

You cannot use the cents per kilometre rate and then add separate deductions for the same car costs.

A 12 week logbook is not required when using this method. However, you still need a reasonable basis for the kilometres claimed.

Calendar entries, work diaries, invoices, appointment records, customer schedules and digital trip records can all help support the calculation.

Automatically claiming 5,000 kilometres without calculating your genuine eligible travel is not enough.

When can the cents per kilometre method be useful?

The cents per kilometre method may suit someone with modest eligible travel who wants a simpler calculation.

However, simple does not always mean better.

A person travelling fewer than 5,000 business kilometres may still receive a larger deduction under the logbook method where their running costs and business use are high.

It is worth comparing the two methods before deciding which one to use.

What is the logbook method?

The logbook method allows an eligible taxpayer to claim the business or work related percentage of the actual cost of operating the car.

Relevant expenses may include:

1. Fuel and oil.
2. Registration and insurance.
3. Repairs, tyres and servicing.
4. Lease payments.
5. Eligible interest on money borrowed to purchase the car.
6. Decline in value, subject to the applicable tax rules and car cost limits.

A valid logbook generally needs to cover at least 12 continuous weeks.

The selected period should reasonably represent how the car is normally used during the income year.

A valid logbook may generally be relied on for up to five years if the pattern of use does not materially change.

Odometer readings and supporting expense records must still be maintained in the later years.

A new logbook may be required where the driver changes roles, begins using the vehicle differently or the recorded business use percentage is no longer representative.

What must an ATO car logbook include?

For each business or work related journey recorded during the logbook period, include:

1. The date the journey began and ended.
2. The odometer reading at the beginning and end.
3. The number of kilometres travelled.
4. The reason for the journey.

The purpose should clearly show how the trip was connected with earning income.

A description such as “client meeting at Parramatta office” is stronger than simply writing “business”.

Other useful descriptions may include:

1. Travel from warehouse to supplier.
2. Site inspection at customer property.
3. Travel between client appointments.
4. Equipment delivery to job site.
5. Meeting with customer at Melbourne office.

Entries should be completed at the end of the trip or as soon as practical afterwards.

Opening and closing odometer readings for the full period capture the total distance travelled, including private use.

A logbook should not be recreated months later from memory.

You should also retain the vehicle details, opening and closing odometer readings and documents supporting the running costs being claimed.

Which method can produce the better result?

Consider a sole trader who travels 8,000 eligible business kilometres during the income year.

The car costs $12,000 to operate and a valid logbook shows 70 per cent business use.

Under the cents per kilometre method, the claim is capped at 5,000 kilometres multiplied by 91 cents.

This produces a deduction of $4,550.

Under the logbook method, $12,000 is multiplied by 70 per cent.

This produces a deduction of $8,400.

In this example, the logbook method produces an additional deduction of $3,850.

This is an illustration only.

The result will depend on the eligible kilometres, actual costs, business use percentage, vehicle ownership and available evidence.

A larger claim is only useful when it is technically available and properly supported.

Why do manual logbooks often fail?

A paper logbook can be valid, but it requires consistency.

Business owners moving between clients, suppliers and job sites may miss trips, use vague descriptions or forget odometer readings.

Fuel receipts can also disappear, while insurance and servicing documents are often stored in different places.

By the end of the year, the taxpayer may have a trip record but no complete expense history to apply the business use percentage against.

A digital logbook does not change the tax law.

It can, however, make it easier to create, organise and retain the records needed to apply the rules correctly.

How can CarSavvy help?

CarSavvy is an Australian digital car logbook and expense tracking app designed to keep vehicle records in one place.

According to CarSavvy, its features include:

1. Automatic trip tracking through a phone’s GPS and vehicle Bluetooth connection.
2. Business and private trip classification.
3. Receipt scanning and expense capture.
4. Fuel, insurance, servicing and maintenance records.
5. Odometer tracking.
6. Reports that can be exported for an accountant or employer.
7. Support for multiple vehicles and workplaces.
8. Registration, insurance and service reminders.

CarSavvy may reduce missed trips during the 12 week period, create clearer records for employees travelling between locations and keep separate records for businesses operating several vehicles.

CarSavvy also offers a free vehicle logbook template for drivers who prefer to begin with a spreadsheet.

Using an app does not automatically make a trip deductible or guarantee a tax claim.

The taxpayer remains responsible for classifying travel correctly, retaining evidence and applying the tax rules.

An accountant should review the final treatment.

What about company cars and fringe benefits tax?

Where an employer provides a car that is available for private use by an employee or director, fringe benefits tax may apply.

The taxable value of the car benefit can generally be calculated using either the statutory formula method or the operating cost method.

The operating cost method considers the total costs of operating the car and its business use percentage.

This makes valid logbook and odometer records important.

The statutory formula method is not simply a charge equal to 20 per cent of the car’s value.

It considers the car’s base value, days available for private use, employee contributions and the applicable statutory percentage.

Fringe benefits tax is federal and applies nationally.

However, each result can differ depending on the vehicle, ownership, private availability, employee contributions and whether an exemption applies.

How are employee car allowances and reimbursements treated?

An allowance and a reimbursement are not the same.

An allowance is generally an amount paid to an employee to cover an expected expense.

PAYG withholding and reporting rules may apply.

Receiving a car allowance does not automatically entitle an employee to an equal tax deduction. The employee still needs to have incurred an eligible expense and meet the record keeping requirements.

A reimbursement generally occurs when an employer repays an employee for an actual expense already incurred.

Reimbursements may have fringe benefits tax implications for the employer, depending on the expense and any available exemption or reduction.

Businesses should ensure their payroll records, supporting documents and tax treatment match the true nature of the payment.

Common car expense mistakes

1. Claiming the regular trip between home and work without a valid exception.
2. Automatically claiming the maximum 5,000 kilometres.
3. Claiming fuel or registration in addition to the cents per kilometre rate.
4. Applying individual calculation methods to a company or trust without advice.
5. Keeping a logbook but failing to retain actual expense records.
6. Using vague trip descriptions such as “work” or “business”.
7. Relying on an old logbook after the pattern of use has changed.
8. Assuming an app decides whether a trip is deductible.
9. Combining the records of several vehicles.
10. Waiting until tax time to reconstruct the entire year.

Frequently asked questions about car logbooks in Australia

Is a digital car logbook accepted by the ATO?

Digital records can be accepted where they capture the required information and are accurate, accessible and capable of being reviewed.

How long must a car logbook run?

A logbook generally needs to cover at least 12 continuous weeks that represent the normal use of the car.

How long can I use the same logbook?

A valid logbook can generally be used for up to five years if the business use pattern remains representative.

Can I switch methods each year?

Eligible taxpayers can generally choose the method that suits their circumstances for each income year, provided they have the required records.

Can I claim 5,000 kilometres without evidence?

No.

You do not need a formal logbook for the cents per kilometre method, but you must be able to explain how the kilometres were calculated.

Can I claim fuel on top of the 91 cent rate?

No.

The cents per kilometre rate already accounts for the relevant running costs.

Can I claim travel from home to work?

Usually not.

Specific exceptions may apply, including some cases involving itinerant work, a genuine employment base at home or the required transport of bulky equipment.

Does each vehicle need its own logbook?

Yes.

Separate records are needed for each car where the logbook method is used.

Do companies use the cents per kilometre method?

Companies generally claim actual motor vehicle expenses instead.

Company cars may also create fringe benefits tax obligations.

Does a CarSavvy report guarantee my claim?

No.

CarSavvy can help organise your evidence, but your accountant should confirm which trips and costs are deductible.

Should I use a spreadsheet or an app?

Either can work if the records meet the relevant requirements.

An app may be easier for drivers who regularly forget to enter trips or want their vehicle expenses and trip records stored in one place.

What records should I provide to my accountant?

Provide your:

1. Logbook or kilometre calculation.
2. Opening and closing odometer readings.
3. Vehicle purchase or lease information.
4. Finance and interest details.
5. Registration and insurance records.
6. Fuel, servicing and repair records.
7. Details of any allowances or reimbursements.

Make your car expense claim easier to support

The best car expense method is not automatically the one producing the largest number.

It is the method that applies to your structure, reflects genuine business use and is supported by reliable records.

A tool such as CarSavvy can make record keeping easier by tracking trips and bringing expenses into one place.

Latitude Accountants can then help determine what is deductible, compare the available calculation methods, review company car and fringe benefits tax obligations, and prepare a claim that reflects your circumstances.

Need help with car expenses, vehicle records or business deductions?

Contact Latitude Accountants to arrange a consultation with our accounting team.

We work with sole traders, employees, companies, trusts and growing businesses across Sydney, Melbourne, Adelaide and throughout Australia.

The right records give your accountant better information and make it easier to support your position if the ATO asks questions.

Contact Latitude Accountants today to make sure your vehicle expenses are being recorded and claimed correctly.

This article contains general information only and does not constitute personal tax advice. Tax outcomes depend on your individual circumstances. Seek professional advice before making decisions based on this information.