Car Expenses: Using the Cents per Kilometre Method

The cents per kilometre method offers a straightforward way to calculate how much you can deduct for car-related work or business expenses.

Who Can Use This Method?

• Only individuals, including sole traders, or partnerships (where at least one partner is an individual), can use this method.

• If your business operates through a company or trust, you must use the actual costs method instead.

What Does the Rate Cover?

The cents per kilometre rate includes all of the following:

• Registration

• Fuel

• Servicing

• Insurance

• Depreciation

How the Method Works

• To calculate your deduction:
  Work/business kilometres travelled × applicable rate

• Current and recent rates:

  • 2024–2025 tax year: 88 cents per kilometre

  • 2023–2024 tax year: 85 cents per kilometre

• The rate is generally updated annually.

Important Limits

• You can only claim up to 5,000 work/business kilometres per car, per year.

• If you travel more than 5,000 km for business purposes, you must use the logbook method.

• No need for detailed written evidence of your kilometres,
  but the ATO may request supporting records (e.g., diary entries or trip logs).

Definition of a “Car” (for Tax Purposes)

• A car is a motor vehicle, including a 4WD, designed to:

  • Carry fewer than 9 passengers, and

  • Carry a load of less than one tonne

• Vehicles not classified as cars (e.g., most utes) require the actual costs method.

Apportioning Private vs Work/Business Use

• You must accurately identify and justify the percentage of travel for work/business.

• You cannot claim for the private-use portion.

• Use a logbook or diary to track and support this breakdown.

Key Note on Home-to-Work Travel

• Travel between your home and your place of work is considered private use, unless:

  • Your home is your place of work, or

  • You operate a home-based business and the trip was for business purposes.