Log your cents- Claiming car deductions in your personal tax return
One of larger claims that we see a lot of our clients making in their individual tax returns in a deduction for work related use of their car. The ATO has lots of complex rules around this so we thought we would bring it all back to basics and explain the main conditions and ways to be able to make this claim.
For starters to be eligible to claim a tax deduction, your car travel needs to be a work related purposes. This means:
You need to be using your car to travel for work purposes. Going to a different job location or between jobs meets this definition
Travel between home and work is personal in nature, unless you are required to carry bulky tools or equipment with no safe space to store them at work
Incidental travel, such as going to the post office on the way to work, does not make the whole travel work related
Once you have established that you have work related travel, there are two methods that can be used to calculate your tax deduction for the year:
1. Cents per km method
2. Log book method
Cents per KM Method
Under this method you calculate all of the work related km you did over the financial year and the ATO gives a set rate per km that you can use to calculate the deduction. For the 2025 financial year this rate was $0.88 per km travelled.
This is a good method because the substantiation is easy to keep track of and you do not need to keep receipts of all of your expenses. The downside is that this deduction is limited to 5000km per vehicle per year, so if you are using your car significantly for work, this might limit the deduction that you can claim.
2. Log Book Method
This method requires you to complete a 12 week log book that calculates the work related percentage of car use when compared to your total car use. The log book must contain:
Dates of when it begins and ends
Odometer readings at start and end of log book
Total km travelled in log book period
Number of km travelled for each journey over this period and a description of what activity was done and client details if related to visiting a client
Odometer readings at start and end of each income year
Make and model/ car details
This can be quite difficult to do but a valid log book can last up to 5 years if the business use does not change significantly each year.
From there we can use this percentage to claim a percentage of all car expenses for the year including:
Fuel
Maintenance
Insurance
Registration
Depreciation
This method requires you to keep receipts showing all expenses so can be quite burdensome. If there are high car costs as well as a high work percentage, this method can give a much greater result than the cents per km method.
So what is best?
Choosing which method is best in your circumstance is best done by weighing total deduction and tax saving of each method, against the effort & time needed to keep records to substantiate the claim.
Each year when we do the tax returns for our clients, we like to talk about car use and compare methods. This ensures our clients know what they need to do in the next financial year, to make sure they can claim the biggest deduction possible, while also making sure they have all the records they need in the event of an ATO audit.
Disclaimer: Please be advised that the above information is a brief overview. This information should not be relied upon. No warranty express or implied is given in respect to the information provided and accordingly no responsibility is taken by Go Further Accounting for any loss resulting from any error or omission contained within this website. It is only intended to be general in nature and anyone intending to apply the information to their practical circumstances should seek professional advice to independently verify the information and how it applies to their specific circumstances.