Driving for work or business can create a valuable tax deduction, but the right claim is not simply a matter of adding up how far you travelled. The key is to identify which trips were genuinely connected to earning your income, choose the method that suits your circumstances and keep records that support the amount claimed.
For sole traders, the kilometres claim can be a practical way to recognise the cost of travelling to clients, suppliers, job sites and other business locations. Employees may also be able to claim eligible work-related car travel. However, ordinary travel between home and a regular workplace is usually private travel, even if the commute is long or inconvenient.
Start with the trip, not the kilometres
Before choosing a calculation method, separate business or work-related journeys from private ones. A deduction is available only for travel that has the required connection with producing assessable income.
Common examples of potentially deductible travel include:
– travelling from your office, workshop or regular work location to a client meeting
– moving between separate work locations on the same day
– visiting suppliers, collecting stock or delivering goods
– travelling to inspect a job site, rental property or business premises where that travel is connected with your income-producing activities
– travelling between clients if you run a mobile service business
– attending an off-site work meeting, conference or training activity where the travel is sufficiently connected with your work or business.
For a sole trader, this may include driving from your home-based business to a customer’s premises, then from that customer to a supplier, and then back to your home office. The purpose and pattern of each leg matters.
What usually cannot be claimed is the ordinary trip between home and a regular workplace. The fact that you check emails at home, take calls in the car, work overtime, receive a travel allowance or live a long way from work does not automatically turn a normal commute into deductible travel.
There are limited exceptions, including some situations involving itinerant work, carrying bulky tools or equipment where strict conditions are met, or travelling directly from home to an alternative work location. These situations are highly fact-dependent, so it is worth getting advice before including home-to-work travel in your claim.
A useful habit is to record the reason for each trip at the time you make it. “Client meeting”, “collect supplies” or “site inspection” is much more useful than a diary entry that simply says “work travel”.
Check that your vehicle and ownership arrangement fit the rules
The standard cents per kilometre and logbook methods are designed for a “car” under the income tax rules. Broadly, this includes a motor vehicle designed to carry a load of less than one tonne and fewer than nine passengers, including the driver.
That means a sedan, hatchback, SUV and many smaller utes may be treated as cars. However, motorcycles, trucks, minibuses and some utes or vans are not cars for these purposes. If your vehicle falls outside the car definition, you generally need to claim the business portion of actual expenses instead.
The ownership arrangement also matters. The car expense methods are generally available where you own or lease the car, including under a hire-purchase arrangement. Registration alone is not always decisive, but you should be able to show that you are the person who bears the ownership or leasing costs.
For example, if a car is registered in a spouse’s name but you purchased it and are responsible for its running costs, the position may need closer review. If you use someone else’s car and personally pay some costs, you may still have a deduction for eligible costs you actually incur, but the standard car methods may not apply in the same way.
Sole traders should also distinguish between a car owned personally and one owned by a company or trust. The cents per kilometre method is relevant to individuals and partnerships including individuals. It is not a shortcut for a company or trust-owned vehicle. Those structures need a separate review of actual expenses, private use, reimbursements, fringe benefits tax and, for private companies, potential Division 7A implications.
The cents per kilometre method: simple, but not a blanket claim
For the income year beginning on 1 July 2026, the cents per kilometre rate is 91 cents per eligible business kilometre. The rate is set for the relevant income year, so it is important not to use a prior year’s rate when preparing a return.
Under this method, multiply eligible business kilometres by the prescribed rate. The method is capped at 5,000 business kilometres per car for the income year.
The calculation is straightforward:
> Eligible business kilometres × 91 cents = deduction
The rate is intended to cover the full cost of running the car. It includes items such as:
– fuel and oil
– registration
– insurance
– servicing and repairs
– tyres
– cleaning and maintenance
– decline in value, often called depreciation.
This is an important point. If you use the cents per kilometre method, do not add fuel receipts, registration, repairs, insurance, loan interest or depreciation on top of the kilometre amount for the same car. Doing so can lead to a double claim.
You do not need to keep every fuel or service receipt for the cents per kilometre method. However, you still need to be able to demonstrate how you arrived at your business kilometre figure. A reasonable estimate is required, not a rough guess made at tax time.
Useful supporting records can include:
– a calendar showing client appointments and job locations
– a digital diary
– a spreadsheet of business trips
– a mileage-tracking app
– invoices or job records that match the travel
– odometer readings
– route records where appropriate.
The 5,000 kilometre limit is not an automatic entitlement. Claiming the maximum simply because it is available is risky if your records do not support that level of work or business travel.
A practical example
Consider a self-employed consultant who works from a home office and visits clients throughout the year. They keep a diary recording client visits, networking events and trips to collect business supplies. At year end, their records support 3,700 eligible business kilometres in their own car.
Using the cents per kilometre method for the income year beginning on 1 July 2026, the deduction would be:
> 3,700 kilometres × 91 cents = $3,367
They cannot also claim separate deductions for petrol, servicing, registration, insurance or depreciation for that car under the same method.
This approach may suit a sole trader whose eligible travel is modest, whose car costs are not unusually high or who wants a simpler record-keeping process. It can also be useful for an employee with clearly identifiable work-related trips below the annual kilometre cap.
When the logbook method may produce a better result
The logbook method can be more work, but it may be worth considering where you have substantial eligible business travel, higher running costs or travel above the cents per kilometre cap.
With this method, you calculate the business-use percentage of the car using a valid logbook. You then apply that percentage to eligible car expenses for the year.
Eligible expenses may include:
– fuel and oil
– servicing, repairs and maintenance
– tyres
– registration
– insurance
– interest on a car loan, where otherwise deductible
– lease charges, where applicable
– decline in value of the car.
The purchase price of the car itself is generally a capital cost, so it is not simply claimed as an immediate running expense. Instead, the decline in value rules may apply. Similarly, repayments of the loan principal are not deductible merely because the car is used for work or business.
A valid logbook must generally cover a continuous period of at least 12 weeks that is representative of your normal travel. It needs to record the date, odometer readings at the start and end of each journey, kilometres travelled and the purpose of the trip. You also need opening and closing odometer readings for each income year in which you rely on the logbook.
The logbook percentage can generally be used for several years, provided your travel pattern remains representative and you maintain the required odometer records. If your work changes significantly, such as taking on a new service area, changing premises or moving from mostly office-based work to mobile client work, a new logbook may be sensible and may be required.
The logbook method is often worth modelling where:
– you travel more than 5,000 eligible business kilometres in a year
– your vehicle is expensive to run
– your business-use percentage is high
– you have a newer vehicle with a significant decline in value component
– you want a more precise claim based on actual costs.
You must choose one method for each car for each income year. You cannot use the cents per kilometre method for some costs and the logbook method for others relating to the same car in the same year. You may, however, use different methods for different cars or change methods in a later income year.
Common mistakes that reduce or put a claim at risk
The best way to maximise a car deduction is to claim every amount you are entitled to, while avoiding amounts that cannot be supported. These are some of the errors we see most often.
Claiming ordinary commuting
Driving from home to a regular office, shop, workshop or job location is generally private travel. Calling into a café for coffee, taking a business call or carrying a laptop does not usually change that result.
Treating all travel by a sole trader as business travel
A sole trader may work from home, but that does not make every journey deductible. Personal errands, school drop-offs, holidays, family travel and private weekend driving must be excluded.
Using the maximum kilometre amount without evidence
The kilometres claim requires a reasonable basis. A detailed business calendar, mileage record and job schedule are much more reliable than reconstructing a number from memory at EOFY.
Double counting costs
The cents per kilometre rate already includes running costs and decline in value. If you choose that method, do not add separate expenses for the same car.
Forgetting that parking and tolls need separate attention
Parking fees and tolls incurred while undertaking eligible work or business travel may be deductible in addition to a car expense claim. But they must relate to deductible travel, not to private commuting. Parking at your regular workplace is commonly private in nature.
Using the wrong vehicle method
Not every vehicle is a “car” for the standard methods. A motorcycle, truck or qualifying larger utility vehicle may require an actual-cost approach. The vehicle’s design and carrying capacity matter, not simply what it is called in everyday language.
Ignoring GST treatment
If you are registered for GST, income tax deductions and GST input tax credits need to be considered separately. The cents per kilometre method is an income tax calculation method. It does not remove the need to work out whether you are entitled to GST credits for business-related motor vehicle costs reported through your BAS.
The business-use percentage for GST may not always be identical to the percentage used for income tax. This can be particularly relevant where a car is used for both a sole trader business and employment, or where some activities do not give rise to full GST credit entitlement. Keeping clear records helps avoid overstating either claim.
A practical system for stronger car records
Good records do not need to be complicated. They need to be consistent, contemporaneous and connected to your actual work or business activities.
For sole traders and taxpayers using the cents per kilometre method, consider the following process:
1. Record each eligible trip when it happens, not months later.
2. Note the date, destination, business purpose and kilometres travelled.
3. Keep client appointments, invoices, job sheets and supplier records that support the trip.
4. Record your car’s odometer reading at the start and end of the income year.
5. Review your total before lodging to make sure private travel has been removed.
6. Check the cents per kilometre rate for the exact income year being claimed.
If you use the logbook method, add these steps:
1. Choose a representative continuous 12-week period.
2. Record every business journey with complete odometer details and a clear purpose.
3. Keep receipts and other written evidence for car expenses.
4. Calculate the business-use percentage from the logbook.
5. Retain annual odometer records while relying on that logbook percentage.
6. Reassess whether the logbook remains representative when your travel pattern changes.
Digital records can work well, provided they are complete and can be produced if needed. An app may make recording easier, but it does not replace the need for a genuine business purpose and a supportable calculation.
Make the method fit your travel, not the other way around
A kilometres claim can be a simple and legitimate way for Australian sole traders and taxpayers to recognise eligible car travel. The right result starts with the nature of each trip, then follows through to the vehicle type, calculation method and evidence kept.
The cents per kilometre method can be efficient for supported claims within the annual limit. For higher business use or more expensive vehicles, a logbook and actual-cost calculation may be more appropriate. The goal is not to claim the largest number possible, but to claim the amount your records and circumstances genuinely support.
This article is general information only and is not personal financial or tax advice. Car expense rules can become more complex where there is a company, trust, GST registration, vehicle finance, mixed employment and business use, or unusual travel patterns. Speak with a registered tax agent or accountant, such as, for advice tailored to your circumstances.