Every Australian who claims car expenses on their tax return faces the same question: should I use the cents per kilometre method or the logbook method? Choosing the wrong one could mean leaving hundreds — or even thousands — of dollars on the table. This guide walks you through both methods with real numbers so you can work out which one puts more money back in your pocket.
Quick overview of each method
Cents per kilometre
- Flat rate of 88 cents per business km (2025–26)
- Maximum of 5,000 business km per car per year
- Maximum deduction: $4,400
- No receipts for running costs required
- You must be able to show how you calculated your km total
Logbook method
- Keep a 12-week logbook to establish your business-use percentage
- Apply that percentage to your total car running costs for the year
- No kilometre cap — claim based on actual expenses
- Requires receipts for all running costs (fuel, rego, insurance, servicing, depreciation, interest)
- Logbook valid for 5 years if circumstances do not change
For a deep dive into keeping a compliant logbook, see our ATO logbook requirements guide.
Side-by-side calculation
Let us compare the two methods using a realistic example.
Scenario: Alex is a sales representative who drives 12,000 business kilometres per year. His car costs $38,000 new, and his annual running costs are:
| Expense | Annual Cost |
|---|---|
| Fuel | $3,200 |
| Registration | $850 |
| Insurance | $1,400 |
| Servicing & tyres | $1,100 |
| Depreciation (prime cost) | $4,750 |
| Loan interest | $1,600 |
| Total running costs | $12,900 |
His logbook shows 70% business use (the remaining 30% is personal driving).
Cents per km result
Alex drives 12,000 business km, but the method caps at 5,000 km.
Deduction = 5,000 × $0.88 = $4,400
Logbook result
Deduction = $12,900 × 70% = $9,030
The logbook method gives Alex an extra $4,630 in deductions. For someone in the 37% tax bracket, that translates to roughly $1,713 more in their tax refund.
When cents per km wins
The cents per km method is not always the worse option. It can come out ahead when:
- Your business kilometres are low — if you drive under about 3,000 business km and your car is cheap to run, the flat rate may beat the logbook percentage.
- Your car is old and fully depreciated — without a depreciation deduction, total running costs are lower, and the logbook figure may not beat the 88c rate.
- You cannot produce a valid logbook — if you did not keep one, cents per km is your only option.
- Simplicity matters more than the last dollar — no receipts to chase, no 12-week tracking period.
Break-even point
A rough rule of thumb: if your total annual car running costs multiplied by your business-use percentage exceed $4,400, the logbook method wins. The higher your running costs and the higher your business-use percentage, the bigger the gap.
When the logbook method wins
The logbook method almost always produces a larger deduction when:
- You drive more than 5,000 business km per year
- Your car has significant depreciation (newer or more expensive vehicles)
- Your business-use percentage is above 50%
- You have high running costs (frequent long drives, toll roads, high insurance)
For most people who use their car regularly for work — sales reps, tradespeople, healthcare workers, mobile professionals — the logbook method is substantially better.
How to calculate your own comparison
Follow these steps:
Step 1: Estimate your business kilometres
Add up all your work-related trips for the year. If you do not have exact figures, estimate based on a typical week and multiply by the number of working weeks.
Step 2: Calculate your cents per km deduction
Take the lower of your business km or 5,000, and multiply by $0.88.
Step 3: Add up your total running costs
Include fuel, registration, insurance, servicing, repairs, tyres, depreciation, and loan interest. Use actual figures from receipts and statements.
Step 4: Apply your business-use percentage
If you have a logbook, use the percentage it establishes. If not, estimate as accurately as you can — but remember you will need a real logbook to claim.
Step 5: Compare the two figures
The larger number is your better method. If the logbook method wins by a significant margin, it is worth the effort of keeping a logbook.
Can you switch methods each year?
Yes. The ATO allows you to choose whichever method suits you each income year. You are not locked in. If your circumstances change — say you buy a newer car with higher depreciation, or your business travel drops — you can switch to the method that gives the better result.
The only requirement is that you have the records to support whichever method you choose. You cannot use the logbook method without a valid logbook, even if the numbers would be better.
Tips for maximising your deduction
- Start a logbook now — even if you have been using cents per km, a 12-week logbook might reveal that the logbook method is worth thousands more.
- Keep every receipt — fuel, servicing, rego, insurance. Digital copies are fine.
- Review annually — run the comparison each year before lodging your return. Your best method may change as your car ages or your travel patterns shift.
- Do not forget depreciation — this is often the largest single component of the logbook method and the one most people overlook.
For more detail on the current ATO rate, check our guide to the cents per km rate 2026-27.
Let Tripbook do the maths
Tripbook tracks every business kilometre automatically, so you always know your exact business travel figure. It also calculates your business-use percentage from your trip data, making it simple to compare both methods and choose the one that saves you the most at tax time.
