Many Australian employees drive for work and never claim what they are entitled to. Car expenses for employees can be deducted in your individual tax return — but only if the travel is genuinely work-related and you have the records to support it.
This guide explains when and how employees can claim, what the ATO expects, and how to handle car allowances.
When employees can claim car expenses
You can claim a deduction for car expenses if you use your own vehicle to perform your employment duties. The key word is your own — if your employer provides a company car or reimburses you in full, there is generally nothing left to claim.
There are also two requirements:
- The travel must be work-related (not personal)
- You must not have been reimbursed by your employer
If you received a car allowance, the situation is slightly more involved (covered below). But if you drove your own car to a client site, between job locations, or to a training course and were not compensated, that expense is yours to claim.
What types of travel qualify
Travel that qualifies:
- Between two separate workplaces on the same day
- From your normal workplace to a client, supplier, or work site
- To attend a work conference or training course
- From home to an alternate workplace when it is not practical to go to your regular workplace first
- Transporting bulky tools or equipment when there is no secure storage at your workplace
Travel that does not qualify:
- Your regular home-to-work commute (this is private travel, even if you live far away)
- Picking up a coffee or running a personal errand on the way to work
- Travel between home and work even if you are on call
The bulky tools exception is worth knowing. If your job requires you to carry large or heavy equipment that cannot reasonably be stored at your workplace, the ATO may allow home-to-work travel to qualify.
Cents per kilometre vs logbook for employees
Employees use the same two ATO-approved methods as sole traders.
Cents per kilometre method Claim 88 cents per business kilometre (2025-26 rate), capped at 5,000 kilometres. The maximum deduction under this method is $4,400. No receipts are needed, but you must be able to demonstrate how you worked out the kilometres.
Logbook method Complete a 12-week continuous logbook to establish your business-use percentage. Then apply that percentage to your actual car expenses for the year: fuel, oil, registration, insurance, servicing, and depreciation. This method has no cap on kilometres and tends to produce a larger deduction for employees who drive frequently for work.
You must pick one method per car per income year. If you start a logbook this year, it remains valid for five years — worth the investment if you drive regularly.
For step-by-step guidance on keeping a proper logbook, see our ATO logbook requirements guide.
Car allowances and reimbursements
Car allowances are payments your employer makes to help cover the cost of using your own vehicle. They are usually a set amount per kilometre, per week, or per year.
If your employer pays a car allowance, it is generally included in your assessable income — you will see it on your payment summary. You then claim your actual car expenses as a deduction. If your actual costs exceed the allowance, you can claim the difference. If your allowance covers all your costs, the claim and the income cancel each other out.
Reimbursements are different. If your employer reimburses the exact cost of each business trip (based on receipts or the ATO rate), that is not assessable income and there is no further deduction to claim.
Always check whether a payment from your employer is classified as an allowance or a reimbursement — the tax treatment is different.
What records to keep
Cents per kilometre: A trip log with the date, distance, and work purpose for each journey. Tripbook records these automatically, giving you a clear log to present if the ATO asks how you calculated your kilometres.
Logbook method: A completed 12-week logbook, receipts for all car expenses, and odometer readings at 1 July and 30 June each year. Keep everything for five years after lodging your return.
If you receive a car allowance, also keep records of the allowance amount and how it is described in your contract or payslip.
Our kilometre tracking guide explains what each logbook entry must include.
Claiming on your tax return (Work-Related Car Expenses)
Employees claim car expenses for employees at Item D1 — Work-Related Car Expenses in their individual tax return.
Under the cents per kilometre method, enter the number of business kilometres. The ATO prefills the current rate and calculates your deduction.
Under the logbook method, enter the total car expenses for the year and the business-use percentage. Depreciation (decline in value) is entered separately.
You do not need to attach receipts when you lodge, but you must have them available if the ATO asks. Claims without supporting records are routinely disallowed.
If your employer has included a car allowance in your income, also complete the income field at D1 so the allowance and the deduction reconcile correctly.
Taking a few minutes to record each work trip in Tripbook means your car expense claim is backed by solid, contemporaneous data — the kind the ATO expects.
