A Guide to Work-Related Car Expense Claims

If you use your personal vehicle for business purposes—such as visiting clients, picking up supplies, or traveling between different work sites—you are entitled to claim work-related car expenses as a tax deduction. However, simply guessing your mileage is a high-risk strategy that often leads to ATO audits.

To ensure you are maximizing your return while staying compliant, you must use one of the two ATO-approved methods for the 2026 tax year.

1. The Cents Per Kilometre Method

This is the simplest way to claim, but it has strict limitations. Under this method, you don't need to provide receipts for fuel or servicing, but you must be able to show how you calculated your work-related kilometers.

• The Limit: You can claim up to a maximum of 5,000 business kilometers per car, per year.
• The Evidence: While you don't need receipts, the ATO may ask for a diary or record of your trips to prove the 5,000km is a reasonable estimate.

2. The Logbook Method (Highly Recommended)

If you travel more than 5,000km for work, or if you have a high-value vehicle with expensive running costs, the logbook method usually results in a much larger tax deduction.

To use this method, you must keep a valid logbook for a continuous period of 12 weeks. This logbook establishes a "business-use percentage" (e.g., 85%) which you then apply to all vehicle-related costs.

What you can claim a percentage of:

• Fuel and oil
• Registration and insurance
• Repairs and servicing
• Lease payments or interest on a car loan
• Depreciation (decline in value)

3. What You Cannot Claim

A common misconception is that the commute from your home to your regular place of work is deductible. In the eyes of the ATO, this is considered private travel, regardless of how far you live or if you work outside normal hours.

The only exceptions are if you are required to carry bulky tools that cannot be safely stored at work, or if your home is a base of operations and you travel to a different site.

4. Record Keeping for 2026

The ATO is increasingly using data-matching technology to verify car claims. We recommend using a digital logbook app or cloud-based online bookkeeping services to track your trips in real-time. This ensures your 12-week logbook is accurate and your receipts are stored safely for the required five-year period.

Summary

Whether you choose the simplicity of cents per km or the depth of the logbook method, accuracy is key to audit-proofing your claim. If you need help calculating your business-use percentage or setting up digital tracking, check out our software migration services today.