What is the cents per kilometre method for car claims in Australia 2026?
The cents per kilometre method allows you to claim a tax deduction for work-related car expenses based on a fixed rate per kilometre. The specific rate for the 2025-26 income year (relevant for 2026 claims) is yet to be announced by the Australian Taxation Office (ATO).
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How it works in practice
Understanding the Cents Per Kilometre Method
The cents per kilometre method is one of two ways individuals can calculate and claim deductions for work-related car expenses in Australia. This method simplifies the process by allowing you to claim a flat rate for each kilometre travelled for work purposes. It's designed for convenience, removing the need to keep detailed receipts for every car expense like fuel, registration, or maintenance.
Annual Rate Updates
The Australian Taxation Office (ATO) sets the fixed rate per kilometre, which is typically reviewed and updated annually. For claims relating to the 2025-26 income year (which would be lodged in 2026), the specific cents per kilometre rate has not yet been announced. Historically, the rate has seen minor adjustments each financial year to reflect changing vehicle running costs. For example, the rate for the 2023-24 income year was 85 cents per kilometre. Taxpayers should refer to the ATO's official guidance for the relevant financial year closer to tax time.
Important exceptions
This method has key limitations. You can only claim a maximum of 5,000 work-related kilometres per car per income year using this method. This deduction covers all running costs, so you cannot claim separate deductions for fuel, oil, registration, insurance, repairs, or maintenance when using this method. It also does not cover capital expenses like depreciation or the cost of the car itself. If your work-related travel exceeds 5,000 km, or your actual costs are significantly higher than the fixed rate, the logbook method might be more beneficial. Only individuals can use this method, not companies or trusts.
What you should do now
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Keep a clear record of all work-related kilometres travelled, such as a diary, logbook, or digital app, for the relevant income year.
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Wait for the Australian Taxation Office (ATO) to officially announce the cents per kilometre rate for the 2025-26 income year.
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Calculate your total deductible car expenses by multiplying your recorded work-related kilometres (up to 5,000 km) by the ATO's published rate for that year.
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Include this calculated deduction in the relevant section of your annual income tax return when lodging in 2026.
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Review your total work-related travel and expenses to determine if the logbook method would yield a larger deduction before finalising your claim.
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