Note:
Claiming your ute or work car expenses correctly is one of the easiest ways for Australian tradies to lower their annual tax bill. Pair your vehicle deduction with our Sole Trader Tax Calculator to estimate your net take-home pay after tax time.
What Is the Cents per km Method?
The cents per km method is the simplest way to claim work-related vehicle expenses on your tax return. The ATO gives you a set flat rate per kilometre driven for work purposes. For the 2026-27 financial year, this rate is 91c/km (up from 88c in FY 2025-26).
This flat rate is designed to cover ALL your vehicle running costs — fuel, registration, insurance, servicing, repairs, tyres, and depreciation. You can claim up to a maximum of 5,000 kilometres per car per year using this method, providing a maximum deduction of $4,550.
The biggest advantage is that you don't need to keep piles of petrol or service receipts. You just need to show a reasonable estimate of your work trips (e.g. Google Maps logs or diary notes).
Current ATO Rates — Cents per km (2024 to 2027)
The ATO regularly updates the cents per kilometre rate to reflect rising fuel prices and maintenance costs. Here are the rates for recent financial years:
| Financial Year | ATO Rate per KM | Max Claim (5,000 km) |
|---|---|---|
| FY 2026-27 (Current) | 91 cents / km | $4,550 |
| FY 2025-26 | 88 cents / km | $4,400 |
| FY 2024-25 | 85 cents / km | $4,250 |
ATO Vehicle Expense Claim Methods Compared
The Australian Taxation Office (ATO) provides two primary methods for claiming deductions on cars and dual-cab utes carrying less than one tonne. Choosing the wrong method could mean forfeiting thousands of dollars in legitimate tax savings:
| Feature / Rule | Cents per KM Method | Logbook Method |
|---|---|---|
| Annual Kilometre Cap | Max 5,000 km per vehicle / per year | Unlimited work kilometres |
| Receipts Required | No receipts required for fuel or repairs | All receipts required (fuel, servicing, tyres, rego, insurance) |
| Maximum Deduction (2026-27) | $4,550 (5,000 km × 91c) | Determined by business % × total vehicle running costs |
| Depreciation & Interest Claims | Included in the flat 91c rate (cannot claim separately) | Can claim business % of depreciation and loan interest |
| Logbook Requirement | No logbook needed (diary notes or map logs sufficient) | Continuous 12-week logbook required (valid for 5 years) |
| Best Suited For | Tradies driving < 5,000 km/yr or low-value runabouts | Full-time tradies, heavy ute driving (> 8,000 km/yr), financed utes |
Side-by-Side Worked Calculation: Cents per KM vs Logbook
Here is a concrete mathematical comparison for a self-employed carpenter driving a dual-cab ute (Ford Ranger) who clocks 18,000 total kilometres in a year, with 13,500 km (75%) verified for business travel:
Worked Comparison: 13,500 Business KM in a $52,000 Work Ute
- Method 1: Cents per KM (Capped):
- Total claimable km: Capped at the 5,000 km maximum ceiling.
- Calculation: 5,000 km × $0.91 = $4,550 Tax Deduction.
- Lost deduction: 8,500 legitimate business kilometres cannot be claimed.
- Method 2: Logbook Method (75% Business Use):
- Diesel fuel & AdBlue: $5,800
- Comprehensive insurance & CTP: $1,650
- State registration: $920
- Tyres & routine scheduled servicing: $1,450
- Ute depreciation (diminishing value) & finance interest: $8,600
- Total Annual Running Costs: $18,420
- Claimable Business Deduction: $18,420 × 75% = $13,815 Tax Deduction.
- Net Financial Advantage: The Logbook method produces an extra $9,265 in deductions. At a 32.5% marginal tax rate, this puts an extra $3,011 of cold hard cash back in the tradie's pocket at tax time!
How the Logbook Method Operates in Practice
To establish a valid logbook under ATO rules, you must record every journey over a continuous 12-week representative period. Once completed, your calculated business percentage remains legally valid for up to 5 financial years, provided your work driving patterns do not change substantially.
At the start and close of each subsequent financial year, you simply log your opening and closing odometer readings to establish total annual kilometres, then apply your 5-year percentage to that year's receipts.
The Bulky Tools & Commute Exception (TR 2021/1 & TR 95/34)
Normally, the ATO classifies travel between home and your first job site as private commuting, which is strictly non-deductible. However, thousands of Australian tradespeople are entitled to claim 100% of these daily trips under the Bulky Tools Exception (Taxation Rulings TR 2021/1 and TR 95/34):
- Requirement 1 — Bulky & Heavy Equipment: You are transporting heavy, bulky equipment essential for your trade (e.g. drop saws, air compressors, extension ladders, jackhammers, welders, or heavy multi-tier tool chests weighing over 20–25 kg).
- Requirement 2 — No Secure On-Site Storage: The job site or builder does not provide a locked, secure container or lock-up cage overnight, or site security insurance does not cover your personal tools.
- Requirement 3 — Necessity: Carrying the equipment in your vehicle is a practical necessity of your trade employment or subcontracting agreement, not merely personal convenience.
When all three criteria are satisfied, the entire trip from your home driveway to the job site transforms from private commuting into deductible work-related travel.
ATO Record Keeping & Audit Rules
Under ATO compliance guidelines, claims without substantiation are the number one audit trigger for Australian trade businesses. Maintain these basic records:
- For Cents per KM: Keep diary entries, work order log sheets, or Google Maps timeline histories detailing date, destination, client name, and trip distance. The ATO will reject claims where a tradie simply enters "5,000 km" without evidence of how the figure was calculated.
- For Logbook Method: Maintain your 12-week logbook recording date, trip destination, business purpose, and start/finish odometer readings. Store digital photo receipts of all fuel and maintenance invoices in accounting software (e.g. Xero, MYOB) for 5 years.