If you use your own car for work or business, the cents per kilometre method is the simplest way to claim a deduction, no receipts, no logbook, no fuss. But simple does not mean generous by default. Most business owners either under-claim because they lose track of their work kilometres, or over-claim and hand the ATO an easy reason to knock the deduction back. Getting it right starts with knowing the current rate and the rules that sit around it.
For the 2026-27 income year, the ATO cents per kilometre rate is 91 cents per kilometre. Here is exactly how the method works, how much you can claim, and how to decide whether it beats the logbook method for your situation.
What is the cents per kilometre method?
The cents per kilometre method lets you claim a set rate for every business or work kilometre you drive in your own car, up to a yearly cap. The single rate is designed to cover all of your car running costs rolled into one number, so you do not add fuel, servicing or anything else on top. The car does not have to be registered in your name either: see our guide on claiming motor vehicle expenses when the registration is not in your name.
It only applies to a car, a vehicle designed to carry a load of less than one tonne and fewer than nine passengers. Larger utes, vans and trucks over one tonne do not use this method; they claim actual running costs instead. If you are unsure which category your vehicle falls into, our full guide to claiming motor vehicle expenses on tax walks through every vehicle type.
The ATO cents per km rate for 2026-27
The rate for the 2026-27 income year (1 July 2026 to 30 June 2027) is 91 cents per kilometre. That is up from 88 cents in 2025-26. The ATO reviews the rate each year to reflect movements in the cost of running a car, so it is worth checking the current figure before you lodge rather than reusing last year’s number.
One rate applies for the whole year regardless of the size of your engine or the make of your car. A small hatchback and a large SUV are claimed at the same 91 cents. You can confirm the current rate directly on the ATO’s motor vehicle and car expenses page.
How much can you claim?
You can claim for a maximum of 5,000 business kilometres per car, per year. At 91 cents, that caps the deduction at $4,550 per car for 2026-27. If two people share the use of a car, each can claim up to their own 5,000 kilometre limit for their own work travel.
The maths is straightforward: business kilometres travelled, multiplied by 91 cents. A few worked examples for 2026-27:
- 2,000 business km x $0.91 = $1,820
- 3,500 business km x $0.91 = $3,185
- 5,000 business km (the cap) x $0.91 = $4,550
If you genuinely drive more than 5,000 business kilometres a year, the cents per kilometre method will short-change you once you hit the cap. That is the point where the logbook method usually starts to win, more on that below.
What the 91 cent rate actually covers
The single rate bundles together every running cost of the car, so you cannot claim any of these separately on top:
- Fuel and oil
- Registration and insurance
- Servicing, repairs and tyres
- Depreciation (decline in value) of the car
This is the trade-off for not keeping receipts. The rate is meant to approximate all of these costs across an average car. If your car is expensive to run or you drive a lot for work, the actual costs may well exceed what 91 cents per kilometre returns, which is exactly why the method comparison matters.
Cents per km vs the logbook method
There are two ways to claim car expenses, and you can choose whichever gives the better result each year:
- Cents per kilometre, best for lower business use (roughly under 5,000 km) and people who want minimal paperwork. Capped at $4,550 for 2026-27.
- Logbook method, best for higher business use. You keep a 12-week logbook to establish your business-use percentage, then claim that percentage of your actual running costs including fuel, insurance, servicing and depreciation. No 5,000 km cap.
For a business owner clocking up 15,000 work kilometres a year in a car that costs real money to run, the logbook method can return several times the cents per kilometre cap. The catch is discipline: a valid logbook, kept for a continuous 12 weeks, plus receipts for the year. If that sounds like a lot to manage, it often pays for itself, and it is one of the first things we review when a new client comes on board.
Not sure you are claiming your car the right way?
At Pinnacle Accounting & Advisory we help Melbourne business owners choose the method that leaves them better off and keep records that stand up. Book a consultation with Mina.
Book a ConsultationRecord-keeping: what the ATO expects
You do not need receipts to use the cents per kilometre method, but you do need to be able to show how you worked out your business kilometres. A reasonable estimate is acceptable, but it has to be based on something real, for example a regular pattern of trips (three client visits a week, 40 km round trip, 46 working weeks) or a representative diary of your travel over a period.
Only work-related travel counts. The daily commute between home and your regular place of business is private and cannot be claimed. Trips between job sites, to clients, to the accountant or bank, or to buy stock generally can. For the finer points on what counts, we answer the most common queries in our car tax deductions questions answered article.
Common mistakes business owners make
- Claiming the commute. Home to your usual workplace is private travel, not business kilometres.
- Guessing without a basis. “About 5,000 km” with nothing behind it is the claim most likely to be adjusted on review.
- Double dipping. Adding fuel or servicing on top of the cents per kilometre claim. The rate already includes them.
- Using the wrong method by default. Sticking with cents per kilometre out of habit when a logbook would return far more.
- Claiming for a vehicle that is not a car. Over-one-tonne utes and vans use actual costs, not this method.
Which method is right for your business?
The right answer depends on how far you drive for work, how much your car costs to run, and how the vehicle is owned, personally, through a company, or through a trust. Ownership structure changes not just how you claim the car, but the fringe benefits tax and asset protection picture around it. This is the kind of decision that is far cheaper to get right up front than to unwind later.
At Pinnacle Accounting & Advisory we look at the whole picture, not just the car line on your return. As part of ongoing tax planning, we work out which method leaves you better off, make sure your record-keeping will stand up, and structure vehicle ownership so it works with the rest of your affairs. If you want a second opinion on how you are claiming your car, our Melbourne tax accountants are here to help.
Frequently asked questions
What is the cents per km rate for 2026-27?
The ATO cents per kilometre rate for the 2026-27 income year is 91 cents per kilometre, up from 88 cents in 2025-26. It applies to all cars regardless of engine size.
How much car expense can I claim without a logbook?
Using the cents per kilometre method you can claim up to 5,000 business kilometres per car per year. At 91 cents, that is a maximum deduction of $4,550 for 2026-27, with no receipts required, though you must be able to show how you calculated your kilometres.
Can I switch between the cents per km and logbook methods?
Yes. You can choose the method that gives the best result each income year. Many business owners use cents per kilometre in low-travel years and switch to the logbook method when their work kilometres climb.
Does the cents per km rate include fuel and depreciation?
Yes. The 91 cent rate already covers fuel, oil, registration, insurance, servicing, repairs and depreciation. You cannot claim any of these costs separately on top of a cents per kilometre claim.
Can I claim the drive between home and work?
Generally no. Travel between home and your regular place of work is private and cannot be claimed. Travel between work locations, to clients, or to buy business supplies usually can be. There are limited exceptions, so it is worth checking your specific circumstances.
Frequently Asked Questions
What is the cents per kilometre rate for 2026-27?
The ATO cents per kilometre rate for 2026-27 is 91 cents per kilometre, up from 88 cents in 2025-26. You can claim up to 5,000 business kilometres per car per year using this method, without a logbook but with a record of how you calculated the kilometres.
How does the cents per kilometre method work?
You multiply your work-related kilometres, up to a maximum of 5,000 per car, by the current rate of 91 cents for 2026-27. The rate is designed to cover all running costs including fuel, servicing, registration and depreciation, so you cannot claim those separately.
Do I need a logbook for the cents per kilometre method?
No, but you must be able to show how you worked out your business kilometres, for example with a diary of work trips. To claim more than 5,000 kilometres, or your actual running costs, you need to use the logbook method instead.
Which car expense method should I use?
If you drive fewer than 5,000 business kilometres, the cents per kilometre method is simple and effective. If you drive more, or have high running costs, the logbook method usually gives a larger deduction. It is worth comparing both to see which suits you.
This article provides general information only and does not take into account your personal circumstances. It is not tax, financial or legal advice. Rates and thresholds change, so please confirm the current figures and speak with a registered tax agent before acting. Pinnacle Accounting & Advisory would be glad to help.
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