Claiming work-related car expenses in Australia can significantly reduce your tax bill — but the ATO has strict rules about which trips count, which method you use, and what records you must keep. Getting this right means a larger, defensible claim at tax time.
This guide explains what qualifies, what doesn’t, the two claiming methods, and how to include car expenses in your tax return.
What counts as a work-related car expense?
Work-related car expenses are costs you incur using your own vehicle to perform work duties. That includes fuel, oil, registration, insurance, servicing, repairs, and the decline in value (depreciation) of the car.
The key requirement is that you pay the expense — not your employer. If your employer reimburses you or provides a car allowance, the calculation changes (covered below).
The vehicle must also be a car as defined by the ATO: a motor vehicle designed to carry fewer than nine passengers (excluding motorbikes and utes over one tonne).
Trips that qualify (and ones that don’t)
Qualifying trips include:
- Travel between two separate workplaces on the same day
- Travel from your normal workplace to a client or other work location
- Travel to attend work-related training or conferences
- Travel from home to an alternative workplace (not your usual one) when it is not practical to go to your regular workplace first
Trips that do not qualify:
- Home-to-work travel (even if you do work-related tasks on the way)
- Travel between home and work when your home is not a place of business
- Private errands done during a work trip — the private portion is not deductible
The home-to-work rule is the most common point of confusion. Unless your home qualifies as your place of business, that commute is private travel and cannot be claimed.
Two methods to claim: cents per km vs logbook
The ATO provides two methods for claiming work-related car expenses.
Cents per kilometre method You claim 88 cents for every business kilometre driven (2025-26 rate). The cap is 5,000 kilometres per year. You do not need receipts, but you must be able to explain how you calculated the kilometres — a kilometre log helps. Use our kilometre reimbursement calculator to work out your potential deduction.
Logbook method You complete a 12-week continuous logbook, determine your business-use percentage, and then apply that percentage to your actual car expenses for the year. This method has no kilometre cap and often produces a higher deduction for heavy business users.
You must pick one method per car per year. If you have two cars used for work, you can use a different method for each.
For a full comparison of the two methods, see our ATO car expense guide.
What records you need
Cents per kilometre: The ATO requires that you can demonstrate how you calculated the kilometres. A contemporaneous log — recorded at the time of each trip — is far more convincing than a retrospective estimate. An app like Tripbook automatically tracks each journey so you have a clear, dated record.
Logbook method: You need:
- A completed 12-week logbook with all required entries
- Receipts or invoices for all car expenses (fuel, servicing, insurance, registration)
- Odometer readings at 1 July and 30 June each year
- Records kept for five years after you lodge your return
Without adequate records, the ATO can disallow your claim even if you genuinely drove those kilometres.
Car expenses for sole traders vs employees
Employees can only claim car expenses in their personal tax return. They use the cents per kilometre or logbook method, as described above. If their employer pays a car allowance, the allowance is included in their assessable income and they claim actual expenses against it.
Sole traders have more flexibility. Costs related to business use of a vehicle can be claimed in the business section of the tax return. If the vehicle is solely for business, all running costs are deductible. If used for both business and private purposes, only the business proportion is deductible — which is where the logbook method becomes important.
GST-registered sole traders can also claim GST credits on car expenses (up to the luxury car limit), which employees cannot do.
How to claim on your tax return
Employees claim work-related car expenses at item D1 (Work-related car expenses) in their individual tax return. You select either the cents per kilometre method or the logbook method and enter the relevant figures.
Sole traders lodge a business and professional items schedule. Car expenses used in the business are claimed as business deductions rather than at D1.
If you received a car allowance and it is included in your income, you claim the actual deduction at D1 (or in the business schedule for sole traders). The allowance and the deduction offset each other, though the net result depends on whether the allowance covers your actual costs.
Keeping a complete record of work-related car expenses throughout the year — rather than scrambling at tax time — makes the whole process straightforward. Tripbook records every trip automatically so your kilometre log is always up to date when you need it.
