Claiming vehicle expenses: cents per km or logbook method?

If you use your car for business purposes, you may be able to claim a tax deduction – but how you calculate that deduction depends on the type of vehicle you use and how it’s used.

To qualify, the vehicle must be:

• Owned, leased, or under a hire-purchase agreement, and
• Used for business purposes (not just commuting between home and work).

There are two main types of vehicles for tax purposes:

• Cars – designed to carry less than 1 tonne and fewer than 9 passengers (e.g. most sedans, hatchbacks, and 4WDs)
• Other vehicles – such as:

· Motorcycles · Utes and vans designed to carry more than 1 tonne or 9+ passengers

You may be able to claim:

• Fuel and oil
• Repairs and servicing
• Insurance premiums
• Registration fees
• Lease or loan interest
• Depreciation (within the car limit)

But only the business-use portion is deductible – and not the part used for personal travel (like school runs or trips to the shops).

You’ll need to choose one of two methods: 1. Cents per km method (simpler option) ✔️ Quick and easy – no receipts required, just a reasonable record of your travel (like a diary or spreadsheet). ✔️ Only available for cars, not motorcycles or heavy vehicles. ✔️ Claim up to 5,000 business km per car per year.

Rate for 2025–26: $0.88/km – the year you are lodging now. Rate for 2026–27, for travel from 1 July 2026: $0.91/km. Both are set by the ATO, and the 5,000 km cap applies per car, so the most this method can produce is $4,400 for 2025–26 and $4,550 for 2026–27. Example: If you drove 3,000 business kilometres during the year, your claim would be: 3,000 km × $0.88 = $2,640

2. Logbook method (more detailed, more accurate) ✔️ Required if your business vehicle use is high or you want to claim actual expenses like fuel, rego, insurance, servicing, etc. ✔️ You’ll need a logbook kept for a 12-week representative period.

From this, you work out the business-use percentage and apply it to your actual vehicle expenses. Example: You spend $5,000 annually on running your car, and your logbook shows 60% business use. $5,000 × 60% = $3,000 deduction

Remember that, driving from home to your regular place of work is generally considered private travel, even if you’re self-employed – unless you run a home-based business and are travelling to see clients or suppliers.

Whether you choose the cents per km or logbook method, keeping records is essential. This can include:

• Travel diaries/logbooks
• Fuel receipts
• Registration and insurance papers
• Service invoices
• Finance or lease documents

At BTMH, we help business owners and directors stay compliant – and make the most of their deductions. Choosing the right method can make a big difference to your return. If you’re unsure how to claim vehicle expenses or what’s right for your situation, our team is here to help. Let’s chat.