Cents Per Km 2025: Australian Car Tax Claims Made Easy
- Jul 23
- 9 min read
For the 2024-2025 income year, the official rate from the Australian Taxation Office (ATO) is a straightforward 88 cents per kilometre. This all-in-one figure is designed to make your tax claim simple. It covers all your car's running costs—think fuel, insurance, rego, and even depreciation—without you needing to keep a shoebox full of receipts.
The only catch? It’s capped at a maximum of 5,000 business kilometres per year.
Your Quick Guide to the Cents Per Km Rate 2025
So, what exactly is the cents per kilometre method? Think of it as the ATO's express lane for claiming work-related car expenses. It’s perfect for employees and sole traders who use their personal car for work and want a hassle-free way to calculate their deduction at tax time.
Instead of meticulously tracking every dollar you spend on fuel, servicing, or insurance, you just use a single, flat rate. It's a massive time-saver on the record-keeping front while still letting you claim a valuable deduction for your business travel.
What Does the 88-Cent Rate Actually Cover?
This is a common point of confusion, but it’s quite simple. The ATO sets this rate to represent an average of all typical car running costs. This includes:
Fuel and oil
Registration and insurance
Repairs and servicing
Depreciation (the natural decline in your car's value)
The key thing to remember is this: when you use the cents per km method, you can't claim any of these running costs separately. The 88-cent rate is a package deal, bundling everything into one neat calculation for your tax return.
Are You Eligible to Use the Cents Per Km Method?
Before you start adding up kilometres, it’s essential to check if you can actually use the cents per kilometre method. This straightforward approach is a fantastic option, but it’s specifically for employees, partners in a partnership, and sole traders who use their own car for work-related trips.
So, what does "your own car" really mean? In the eyes of the ATO, this is a vehicle you either own or have under a lease arrangement. You can't claim kilometres for a company car or one that belongs to someone else, like your employer. The whole point of this method is to compensate you for using your personal car for business.
What Counts as a Work-Related Journey?
This is where many people get tripped up. The ATO has very clear rules about what makes a trip claimable, and understanding them is the most critical part of checking your eligibility.
Here are some common examples of travel you can claim:
Driving directly from your primary job to a second one.
Travelling to a client’s office or another workplace that isn't your usual one.
Visiting different job sites or running work-related errands, like heading to the post office or picking up supplies.
Essentially, if the travel is a direct part of earning your income, you’re generally good to go. But there's one major exception.
Your daily commute between home and your main workplace is almost always considered private travel. From the ATO's perspective, this is a personal expense, and those kilometres cannot be included in your tax claim.
Navigating the Finer Details
What if your employer gives you a car allowance? Good news – this doesn't stop you from making a claim. That allowance is treated as taxable income, so you can (and should!) still claim your work-related travel using the cents per km 2025 rate to help offset it. If you’re unsure how this affects your overall tax situation, our guide on the Australian tax-free threshold offers more context.
And if you use more than one personal car for work? You can make a separate claim for each vehicle. Just keep in mind that the 5,000-kilometre cap applies to each car individually, not to you as a person.
How To Calculate Your Claim With a Real-World Example
Theory is one thing, but seeing how it works in practice is what really makes it click. Let's walk through a common scenario to show you exactly how the cents-per-kilometre calculation plays out and what your claim could look like.
Meet ‘David,’ a freelance graphic designer based in Brisbane. He’s often on the road in his personal car, driving to meet clients, attend project briefings, and occasionally pick up special print materials for his work.
David's Work-Related Travel
Throughout the 2023–2024 income year,(85 cents per kilometre.), David was diligent about tracking his work-related trips. He kept a simple diary, noting the date, the reason for the trip, and the kilometres travelled for each journey. This is the exact kind of record-keeping the ATO loves to see.
By the end of the financial year, his records show he has driven a total of 4,200 work-related kilometres. He hasn't bothered keeping fuel or insurance receipts because he knows he wants to use the straightforward cents-per-km method.
The calculation itself is incredibly simple. David just needs to multiply his total business kilometres by the official rate for the year.
Calculation Breakdown: 4,200 work-related kilometres × $0.85 per km = $3,570
That final figure, $3,570, is the total deduction David can claim for his car expenses on his tax return. It’s that easy. No need to tally up receipts for running costs—just a clear, simple record of his business kilometres.
What if David Drove More?
The 5,000-kilometre cap is a crucial rule you can't afford to forget. David’s 4,200 km is well within this limit, making the cents-per-km method a perfect, hassle-free fit for him.
However, let’s imagine his business travel had amounted to 6,000 km. In that case, he could only claim for the first 5,000 km using this method. The calculation would be 5,000 km x $0.85 = $4,250, and he would miss out on claiming the extra 1,000 km.
In that situation, David would almost certainly be better off using the logbook method. The logbook method has no kilometre limit and could result in a much larger deduction if you do a lot of driving.
Keeping Records The ATO Will Accept
Think you can skip the paperwork with the cents per km method? Think again. A claim without proof is a gamble you really don't want to take with the ATO.
While you get to happily forget about chasing down fuel receipts or insurance invoices, you absolutely must have a record of your work-related journeys. This is the one non-negotiable part of the deal.
It doesn't have to be a major headache. A simple diary, a spreadsheet on your computer, or even a dedicated app on your phone will do the trick. The whole point is to create a clear, simple trail that shows the ATO exactly how you landed on your total business kilometres. It’s your backup if they ever come knocking.
What Your Records Must Show
So, what does the ATO actually want to see? For every single work-related trip, you need to jot down a few key details. This information is the bedrock of your entire calculation.
Your log needs to clearly show:
The date of the trip.
The reason you were travelling (something like 'Site visit to Smith Constructions' or 'Meeting with ABC Corp' is perfect).
The distance you covered for that specific trip.
It’s simple, but crucial. The ATO can ask you to show them how you calculated your claim at any time. Having these records ready means you can hand over the evidence immediately and avoid any drama during a potential audit.
Getting into the rhythm of good record-keeping is more than just a tax-time task; it's essential to avoid bad bookkeeping habits that can cause bigger problems down the line. Good habits now make for a much less stressful July.
Remember, keeping these records is a mandatory part of using the cents per km method. To see how this fits into the bigger picture of car expense claims, check out our comprehensive guide on how to claim your car expenses tax deduction.
Cents Per Km vs Logbook Method: Which One Is For You?
Choosing the right deduction method can make a massive difference to your final tax refund. So, when it comes to the cents per km versus the logbook method, which one will leave more money in your pocket? Honestly, the answer comes down to your personal circumstances.
The cents per km method is fantastic for its sheer simplicity. If you travel less than 5,000 business kilometres a year and the thought of collecting a mountain of receipts makes you groan, this is your go-to option. It’s designed for convenience, offering a straightforward claim with minimal fuss.
On the other hand, the logbook method is built for those who do some serious mileage or have higher-than-average running costs.
When the Logbook Method Makes More Sense
If your work has you on the road constantly, pushing you well over that 5,000 km cap, the logbook method will almost certainly give you a much larger deduction. This is especially true for roles in sales, remote services, or for sole traders who travel extensively between different job sites.
It’s also the better choice if your car is expensive to run. This could be due to a few things:
Poor fuel economy: Older cars or larger utes and vans often guzzle more fuel per kilometre.
Expensive insurance or registration: Premiums can vary wildly depending on your vehicle and where you live.
Significant depreciation: If you’ve just bought a new car for work, its value will drop quickly, and you can claim a portion of that loss as a deduction.
It really shows that a one-size-fits-all rate might not reflect your true operating costs, making the logbook's detailed approach much more beneficial for some people.
Key Takeaway: The cents per km method values simplicity and is capped. The logbook method values accuracy and has no cap, making it ideal for high-kilometre drivers or those with expensive cars to run.
This is particularly relevant for anyone in the commercial transport sector. With diesel prices hovering around $1.80 to $2.00 per litre in 2024, a heavy truck's fuel costs alone can easily be 60 to 80 cents per kilometre—far exceeding the simplified rate.
Navigating the rules for each method can feel a bit tricky. For a complete breakdown, our guide on navigating the complexities of car tax deductions in Australia can provide more clarity and help you make the right choice.
Common Questions About the Cents Per Km Method
Over the years, we've heard just about every question there is when it comes to claiming car expenses. Getting the cents per kilometre method right is all about understanding the details, so let's walk through some of the most common questions we get from clients.
This will help you feel confident when it's time to lodge your tax return.
Can I Claim My Daily Commute to Work?
This is easily the number one question, and for most people, the answer is a straightforward no. Your regular drive from home to your usual place of work is considered a private expense by the ATO. Their logic is that you choose where you live in relation to your job, so that travel cost is on you.
However, there are a couple of specific situations where this rule doesn't apply. You might have a claim if:
You're required to carry bulky tools or equipment for your job and have no secure place to store them at work. Think of a tradesperson with a ute full of gear.
Your work is "itinerant," which is the ATO's way of saying you don't have a fixed workplace. For example, a relief teacher or a support worker who travels to different clients' homes each day.
These exceptions can be tricky to navigate. If you think one might apply to you, it's always a good idea to get professional advice before making a claim.
How Do I Separate Work Kilometres From Private Ones?
The key here is simple, but it demands a bit of discipline: you need to keep good records. You can only claim the kilometres you drive for legitimate work purposes. That means you have to be able to separate a trip to a client's office from a trip to do the weekly grocery shop.
The best way to do this is to log every work-related trip as it happens. Use a simple diary, a spreadsheet, or a dedicated logbook app. At tax time, you just add up the kilometres from all your work trips. This gives you a clear, defensible total that neatly separates business from personal travel.
Do I Need to Be the Car's Registered Owner to Make a Claim?
This is another point that often trips people up. To use the cents per km method, the ATO is quite specific: the car must be one you own or lease.
So, if your name is on the registration papers or you have a formal lease agreement, you're good to go. But you can't claim expenses for a car your employer owns or provides to you, even if you pop out to run a work errand in it. This method is designed to compensate you for using your personal car for work.
Feeling Confident? Or Need a Second Opinion?
Getting your head around the cents per km rate is a massive step in the right direction. You've now got the know-how to pick the right method and confidently calculate your claim. It’s a great feeling.
But tax can get tricky, and sometimes you just want to be 100% sure you haven’t missed a thing. If you’re left with questions or just want an expert eye to make sure you’re claiming every last dollar you're entitled to, our team of registered tax agents is here for you. We live and breathe this stuff.
Don't leave your hard-earned money on the table. A quick chat with a professional can give you peace of mind that your claim is accurate, compliant, and—most importantly—maximised.
Ready to talk? We offer free online consultations, no strings attached.
• Need assistance? We offer free online consultations: – Phone: 1800 087 213 – LINE: barontax – WhatsApp: 0490 925 969 – Email: info@baronaccounting.com – Or use the live chat on our website at www.baronaccounting.com
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