Understanding which method works best for your tax return
If you use your car for work purposes, whether you’re attending client meetings, making deliveries, or travelling between sites, you may be eligible to claim car expenses at tax time. But which method should you use?
The ATO offers two main methods for claiming car-related deductions:
Each approach has its pros and cons. Let’s break them down with simple examples and a side-by-side comparison.
1. Cents per Kilometre Method
This method is quick and easy. You don’t need receipts for fuel or services—just a reasonable estimate of your work-related kilometres.
Key Facts:
You can claim up to 5,000 km per year per car
Rate for 2024–25 is 85 cents per kilometre
You don’t need a logbook, but you must be able to show how you calculated your trips
The rate includes fuel, servicing, rego, depreciation and insurance
Example:
Amy is a mobile hairdresser. She keeps track of her weekly client visits and calculates that she drives 3,500 km a year for work.
Her claim = 3,500 km × $0.85 = $2,975
This is the maximum she can claim using this method. If she drives more for work, she’ll need to use the logbook method to claim more.
2. Logbook Method
This method takes more effort upfront but may result in a larger deduction—especially if your work use is high.
Key Facts:
You need to keep a 12-week logbook (valid for 5 years if circumstances don’t change)
You must record each trip: start and end km, date, reason, and distance
You’ll also need to keep receipts for fuel, rego, servicing, insurance, loan interest, and depreciation
Your business-use percentage from the logbook is applied to your actual expenses
Example:
Mark is a construction consultant and drives 25,000 km per year. His 12-week logbook shows that 60% of his driving is work-related.
He spends the following annually:
Fuel: $3,500
Rego + Insurance: $1,200
Servicing: $800
Loan Interest: $1,500
Depreciation: $2,000
Total car expenses = $9,000
60% of $9,000 = $5,400 deductible
In this case, the logbook method gives Mark a better return than the cents per km option.
Side-by-Side Comparison
| Feature | Cents per Kilometre | Logbook Method |
|---|---|---|
| Max claimable kms | 5,000 km | No limit |
| Claim includes | All costs (standard rate) | Based on actual expenses |
| Record keeping | Estimate + trip reasoning | 12-week logbook + full receipts |
| Best for | Simplicity, low km users | High km users, more deductions |
| ATO documentation required | Basic evidence of travel | Detailed logbook & expense proof |
Which Method Should You Use?
Use the Cents per Kilometre method if:
You travel under 5,000 km for work each year
You don’t want to track receipts or log trips
Your car expenses are generally low
Use the Logbook method if:
You drive a lot for work (especially over 5,000 km/year)
You want to maximise deductions
You keep good records and your business use is high
Important Reminders
You cannot claim trips between home and your regular workplace (commuting)
Car must be owned or leased by you (not your employer or a friend)
Keep your documentation for at least 5 years in case the ATO asks for evidence
Need Help With Your Vehicle Claim?
Choosing the right method and getting it right can make a big difference at tax time. At Pisani Group, we’ll help you:
✔ Understand what’s claimable
✔ Set up a compliant logbook
✔ Maximise your deductions
✔ Stay ATO-ready
Let’s make sure your car is working for your business and your tax return.
