Car Tax Deduction Calculator — Australia 2026-27
Understand the tax deductions available for your vehicle.
Calculate your work-related car tax deduction using both ATO methods: cents per km (91c/km for 2026-27) and the logbook method. See which gives you the larger deduction and your estimated tax saving. Covers employees and ABN holders.
Estimates based on ATO 2026-27 rates. Not tax advice — consult a registered tax agent. Car deductions are an ATO audit focus area.
Select the question that matches where you are right now.
Your result shows the maximum deduction available from the better ATO method, and the estimated tax saving at your marginal rate. This reduces your taxable income — it is not a cash refund (the refund is taxRate% of the deduction).
A $7,200 deduction at a 37% marginal rate saves $2,664 in tax — not $7,200. The deduction reduces your taxable income, and the tax saving is the marginal tax rate applied to that reduction. At 30%, the same $7,200 deduction saves $2,160. Knowing your marginal rate is essential for calculating the actual cash benefit.
The method comparison chart shows both options. You can choose the higher-deduction method each year — you are not locked in. If your work pattern changes significantly (new job, more driving, new car), recalculate both methods each financial year. The logbook, once created, is valid for 5 years — but you must still keep receipts annually.
Car expense claims are one of the ATO's highest audit-priority areas — particularly home-to-work claims incorrectly treated as work travel. Ensure your claims are accurate, you can substantiate each trip, and you have not included commuting. The ATO data-matches against fuel card and toll data. The myDeductions app creates a contemporaneous record that provides strong substantiation.
The cents per km method is simple, requires no receipts, and is ideal for lower-mileage workers. Here is everything you need to know.
The ATO increased the rate from 88c to 91c/km for 2026-27. For employees, the maximum deduction is 5,000 km × 91c = $4,550. This rate covers all car costs: fuel, depreciation, registration, insurance, and servicing. You cannot claim additional fuel on top of the cents/km deduction — it is an "all in" rate.
For the cents per km method, you do not need fuel receipts or logbook entries. You must be able to show how you calculated the kilometres. Keep a diary or calendar of work trips, use your work email as evidence of client visits, or use a simple spreadsheet showing dates and destinations. The ATO requires you to be able to justify each work trip if audited.
Cents per km wins when: (1) Your actual work km is close to or below 5,000 km; (2) Your car has low running costs — at $8,000/yr total costs and 60% business use, logbook gives $4,800 — less than 5,000 km at 91c ($4,550) unless you drive more than 5,275 work km; (3) You have not kept a logbook and cannot easily reconstruct one. The cross-over point depends on your specific running costs and business percentage. Use the Standard mode to compare your exact numbers.
The logbook method takes more effort but typically delivers a larger deduction — especially for high mileage and expensive cars.
The 12-week logbook must be kept during the income year for which you want to claim. If you are planning to use the logbook method for 2026-27 (year ending 30 June 2027), start your logbook no later than early April 2025 to complete 12 weeks before 30 June. The ATO myDeductions app makes this easy — it uses GPS to automatically record trips.
The biggest advantage of the logbook method over cents/km for business owners is that it includes ATO depreciation — which cents/km does not capture separately (it is baked into the 91c rate). On a $50,000 car with a 25% DV rate: $12,500 depreciation per year. At 70% business use: $8,750 additional deduction — nearly doubling the available deduction compared to a logbook without depreciation included. Enter your car value in Advanced mode to see this impact.
Under the logbook method, work-related parking and toll costs are deductible at 100% — they are not subject to the business-use percentage. A $50 toll for a work trip to a client is fully deductible regardless of your business percentage. The same applies to parking fees at client sites and supplier locations. Keep receipts for all parking and tolls. Use the Advanced mode to add these for accurate total deduction calculation.
ABN holders and sole traders have more flexibility than employees when claiming car expenses — and potentially much larger deductions.
Unlike employees, ABN holders using the cents per km method are not capped at 5,000 km. If you drove 20,000 km for business, you can claim 20,000 × 91c = $17,600 under the cents per km method — or use the business-use percentage method for potentially even more. The business kilometres still need to be for genuine business purposes and must be substantiated.
If you are a small business entity (SBE) with aggregated turnover under $10M, you may be eligible to deduct the full purchase cost of a vehicle in the year of purchase under the IAW — rather than depreciating over 8 years. The depreciable cost is capped at the LCT threshold ($69,883 in 2026-27). The IAW threshold and conditions change frequently — check the current rules at ato.gov.au. Always get advice from a registered tax agent before purchasing a vehicle based on IAW eligibility.
If you are registered for GST and the car will be used partly for business, you can claim an input tax credit of 1/11th of the purchase price (or 1/11th of $69,883 — whichever is lower for a "car"). For a $55,000 car: $5,000 input tax credit claimable on your BAS in the quarter of purchase. This is separate from the income tax deduction. The GST credit reduces the cost base for depreciation purposes. The interaction between GST, depreciation, and the car cost limit is complex — get professional advice for vehicle purchases over $30,000.
How each method works and which gives you a larger deduction
Method 1: Cents per kilometre (2026-27: 91c/km)
The simpler method. Multiply your business kilometres by the ATO rate (91c/km in 2026-27, up from 88c in 2025-26). Employees are capped at 5,000 km maximum ($4,550 maximum deduction). No receipts are required — you need only be able to demonstrate how you calculated the kilometres. This rate is designed to cover all vehicle costs including depreciation, fuel, registration, insurance, and servicing.
Method 2: Logbook method
Keep a logbook for 12 consecutive weeks recording every trip — date, start and end odometer, total km, destination, and business purpose. Calculate your business percentage. Apply this percentage to all actual running costs: fuel, registration, insurance, servicing, repairs, and ATO-calculated depreciation. Parking and tolls for specific work trips are fully deductible separately. No cap on kilometres or deduction amount.
Which method gives a larger deduction?
| Situation | Better method | Reason |
|---|---|---|
| Less than ~5,000 km business use | Compare both — cents/km often wins | Simpler, no admin burden |
| High annual km (>8,000 business km) | Logbook | No cap; captures full cost |
| Expensive car (high running costs) | Logbook | % of high costs > flat rate |
| Low car running costs (~$6,000/yr) | Compare — cents/km may win | 60% × $6,000 = $3,600 vs 5,000km × 91c = $4,550 |
| High business use % (>80%) | Logbook | High percentage amplifies the advantage |
You can switch methods each year
You can choose whichever method gives you a higher deduction in each income year. You are not locked in to the same method year after year. However, if you want to use the logbook method, you need a valid logbook — which must be kept for 12 consecutive weeks. Start your logbook early in the financial year to ensure it is valid for that year's return.
Which trips count as work-related — and which are not deductible
Deductible work-related trips
- Travelling between two separate workplaces (e.g. two jobs)
- Travelling from work to a client site, then returning to work
- Carrying bulky equipment to and from work (e.g. tools that cannot be stored at work)
- Travelling between home and work if your home is an alternative place of work
- ABN/sole traders: driving to and from client sites, supplier visits, bank, accountant
NOT deductible — common mistakes
- Home to work (commuting): The most common mistake. Driving from home to your regular workplace is NOT deductible — even if you work from home sometimes
- Running errands on the way to/from work (e.g. dropping children at school)
- Driving to a training course when the course is not directly related to your current role
- Personal errands combined with work trips (only the work component is deductible)
The home office exception
If you genuinely use your home as a place of work (not just occasionally checking emails), trips from home to another work location may be deductible. The ATO requires you to demonstrate that your home was a base of employment and that you had no alternative fixed work location. This is a complex area — get advice from a registered tax agent if this applies to you.
Carrying equipment exception
If you must carry bulky equipment to work and there is no secure storage at your workplace, the home-to-work trip may be deductible. The key test: the equipment must be genuinely bulky (cannot be carried on public transport), must be necessary for the work, and must not be possible to store at the workplace. Keep records of the equipment carried on each trip.
What your logbook must record, ATO myDeductions app, and logbook traps to avoid
Required logbook entries for each trip
- Date of the journey
- Odometer reading at start of journey
- Odometer reading at end of journey
- Kilometres travelled
- Reason for the journey (e.g. "client meeting at Client Co, 123 Main St" — not just "work")
- Whether the journey was business or private
The ATO myDeductions app
The ATO provides a free app — myDeductions — available on iOS and Android. It allows you to record trips via GPS (auto-calculates km), add receipts by photo, and export a summary directly to your tax return or accountant. This is the simplest way to keep an accurate logbook and receipt records. The GPS trip tracking eliminates manual odometer errors.
Logbook validity period
A logbook is valid for 5 income years from when it was kept, as long as your work use pattern remains substantially the same. If you change jobs, get a new car, or your business use changes significantly, you need a new logbook. The logbook must cover 12 consecutive weeks during the income year in which you first use the car for work (or when the old one expires).
Common logbook mistakes that lead to ATO disallowance
- Vague trip descriptions — "work" without specifying what and where
- Not recording all trips — the ATO requires total km including private trips
- Odometer readings missing or inconsistent
- Logbook not signed and dated at start and end
- Using a logbook from a previous car for a new vehicle
How car deductions differ between sole traders, ABN holders, and employees
Employees
- Cents per km: capped at 5,000 km per year ($4,550 maximum deduction)
- Logbook: no km cap, but must have valid 12-week logbook
- Claim on tax return at Item D1 (Work-related car expenses)
- Cannot claim the car purchase itself as a deduction (only running costs via logbook or cents/km)
- Employer-provided car: may be subject to FBT (Fringe Benefits Tax) — not your deduction
ABN holders / sole traders
- Cents per km: no 5,000 km employee cap — claim actual business km at 91c/km
- Can claim the business-use percentage of all car costs
- Can claim ATO depreciation (diminishing value or straight line)
- ATO car cost limit: $69,883 (2026-27) — depreciation cannot be claimed above this for a "car"
- GST registered: claim GST input tax credit on the purchase (up to 1/11 of $69,883)
- Instant asset write-off (IAW): eligible small business entities may deduct the full cost in Year 1
Company and trust structures
If the vehicle is owned by a company or trust and made available to a director or employee, FBT applies. The employer pays FBT calculated under either the statutory formula method (20% of car cost per year) or operating cost method (actual costs × private use %). EV vehicles are currently FBT-exempt for eligible vehicles provided through a novated lease, which is a significant planning opportunity for employees who need a vehicle.
❓ Frequently asked Frequently asked questions
What is the ATO cents per kilometre rate for 2026-27?
The ATO cents per kilometre rate for 2026-27 is 91 cents per kilometre, up from 88 cents in 2025-26. This rate applies to the first 5,000 km of work-related travel for employees. The rate is designed to cover all car running costs including fuel, registration, insurance, servicing, and depreciation. No receipts are required for the cents per km method — you only need to be able to demonstrate how you calculated the kilometres driven for work.
Can I claim home-to-work travel as a car deduction?
Generally no — the cost of travelling between your home and your regular workplace is not tax-deductible. This is the most common mistake in work-related car expense claims. There are limited exceptions: if you carry bulky equipment that cannot be stored at the workplace, if your home is a genuine base of employment, or if you travel between two separate workplaces. If you believe you have an exception, consult a registered tax agent before claiming as the ATO audits this area closely.
Which car deduction method is better — cents per km or logbook?
It depends on your specific situation. Use this calculator to compare both methods for your circumstances. As a general guide: if you drive fewer than about 5,000 km for work and have lower car running costs, the cents per km method (max $4,550) may be simpler and comparable. If you drive more than 5,000 km for work or have an expensive car with high running costs, the logbook method will likely give you a larger deduction. You can use whichever method gives the higher deduction each year.
Do I need a logbook to claim car expenses as an employee?
You do not need a logbook to use the cents per km method — you just need to be able to demonstrate your business kilometres. However, to use the logbook method (which often gives a larger deduction), you must have a valid 12-week logbook. The ATO's free myDeductions app makes logbook keeping easy with GPS trip tracking. Without a logbook, you are limited to the cents per km method and the $4,550 maximum deduction as an employee.
Where these figures come from
Every threshold and tax rate on this page is taken from the Australian Taxation Office (ATO) — the source of record for Australian income tax, Medicare levy, HECS/HELP repayment, and capital gains tax.
- Individual income tax rates (2026–27, Stage 3) — ATO — Individual income tax rates.
- Medicare levy & surcharge — ATO — Medicare levy.
- HECS/HELP repayment thresholds — ATO — Study and training support loans.
- Capital gains tax rules — ATO — Capital gains tax.
- GST rules — ATO — GST.
- Tax offsets & LITO/LMITO — ATO — Tax offsets.
Last checked: July 2026. Rates and thresholds are reviewed against the source of record each November, when annual adjustments for the following tax year are published.