The cents per kilometre method is a simple way to calculate how much you can claim for car-related work or business expenses. This method is available to individuals (including sole traders) and partnerships where at least one partner is an individual. If your business operates through a company or trust, you will need to use the actual costs method instead to claim car and vehicle running expenses.

The cents per kilometre rate covers all your car running costs, including registration, fuel, servicing, insurance, and depreciation.

How Does the Cents Per Kilometre Method Work?

To calculate your deduction, simply multiply the total business or work kilometres you’ve driven by the applicable rate. For the 2024–2025 tax year, the rate is 88 cents per kilometre (c/km), which is an increase from the 85 c/km rate used in the 2023–2024 tax year. Rates are generally updated each year.

However, you can’t claim more than 5,000 work/business kilometres per car, per year. If you drive more than 5,000 kilometres for work or business, you will need to switch to the logbook method to calculate your deductible car expenses.

You don’t need written evidence for the exact kilometres you travelled, but the ATO may ask you to show how you calculated your work/business kilometres (for example, with diary records).

What Is Considered a “Car”?

The cents per kilometre (and logbook) method applies only to cars. For tax purposes, a car is defined as a motor vehicle (including four-wheel drives) that is designed to carry a load of less than one tonne and fewer than nine passengers.

This means utes are generally not considered cars for tax purposes. Therefore, you cannot use the cents per kilometre method (or the logbook method) to calculate your deductible ute expenses. Instead, you’ll need to use the actual costs method.

Apportioning Private Use

If you use a motor vehicle for both work/business and private purposes, you must correctly identify and justify the percentage of the vehicle’s use that is for work or business. You can only claim a deduction for the work/business portion. Private use does not qualify for a deduction.

This is an area where the ATO often sees mistakes. To ensure accurate claims, you can use a logbook or diary to track private versus work/business travel.

It’s also important to note that travel between your home and your place of work/business is considered private use, unless:

• Your home is your place of work.
• You operate a home-based business and the trip is for business purposes.