How the two methods work
The cents-per-kilometre method is the simple option: multiply work-related kilometres by a single ATO-set rate, 91¢/km for the 2026–27 income year, and that's the deduction. No logbook, no fuel receipts, no servicing invoices, just a reasonable record of how the kilometre figure was worked out if the ATO ever asks (a diary is enough). The rate itself bundles in registration, fuel, servicing, insurance and depreciation, all in one number. The catch is the cap: it only applies to the first 5,000 work kilometres per car each year, for a maximum claim of $4,550. Drive 8,000 work kilometres in the year and the deduction is still calculated on 5,000, not 8,000.
The logbook method takes more record-keeping and has no ceiling at all. Keep a logbook covering a continuous 12-week period that's broadly representative of normal driving (valid for five years, as long as circumstances don't change enough to make it unrepresentative), work out what share of the total kilometres in that period were work-related, then apply that percentage to actual running costs for the whole year: fuel, servicing, tyres, registration, insurance, decline in value (depreciation) and any loan interest, all counted from receipts rather than estimated. There's no kilometre limit and no dollar cap. Employees and sole traders can use either method; companies can't use cents-per-km at all.
What it actually costs
Illustrative, not universal: a new Toyota HiLux Rogue 48V doing 15,000 km a year, using RACQ's own 2025 ownership-cost analysis for fuel, servicing/tyres, registration and insurance, and decline in value (loan repayments themselves are left out, since only the interest portion of a loan is deductible and RACQ's own figures don't split that out separately).
| Option | What it includes | Cost |
|---|---|---|
| Cents-per-km, any work use | 91¢/km, capped at the first 5,000 work km each year regardless of vehicle or actual use | $4,550 max |
| Logbook, 40% business use | 40% of $13,882 in real annual running costs (fuel, servicing/tyres, rego, insurance, decline in value) | ~$5,553 |
| Logbook, 80% business use | 80% of the same $13,882 in real annual running costs | ~$11,105 |
Real figures depend entirely on the vehicle, kilometres driven and business-use share. This is one sourced example, not a universal answer.
Which one actually wins
For a vehicle this expensive to run, the logbook method wins comfortably even at a fairly modest business-use share. At 40% business use, the logbook claim already beats the cents-per-km cap. At 80%, it's more than double it. That's before counting loan interest on top, which the logbook method allows for and the flat rate has already bundled into one fixed, non-negotiable number.
The cents-per-km method still wins in the opposite case: occasional work driving in a car that's cheap to run. Work kilometres well under 5,000 a year, in a vehicle without heavy running costs, can make the flat 91¢/km rate more generous than the real numbers, with none of the logbook's admin. It's also the sensible default if keeping a logbook and every receipt for a full year isn't realistic, since a logbook claim with no records behind it doesn't survive an ATO review.
One more thing worth knowing if an expensive vehicle is financed: the ATO caps the cost base used to calculate decline in value at the car limit, $69,883 for 2026–27, no matter what was actually paid. A ute costing more than that, like the $78,725 drive-away example above, still only depreciates for tax purposes as if it cost $69,883. This is general information, not tax advice; check the numbers against the ATO's own calculator or a tax agent before lodging.
Common questions
Can I switch between the cents-per-km and logbook methods each year?
Yes. Either method can be chosen for a given income year and changed the next, for example after buying a car that costs more to run. A logbook itself stays valid for up to five years as long as it's still representative of normal driving, so switching to it doesn't necessarily mean starting from a blank logbook.
Does the 5,000 km cap apply per car or across all work travel?
Per car, per year. Using more than one car for work in the same year allows up to 5,000 km to be claimed for each one under this method, though most employees and sole traders are only claiming for a single vehicle.
What happens without receipts under the logbook method?
The claim doesn't hold up. The logbook method needs records for both the kilometres (a 12-week logbook and odometer readings) and the actual expenses (receipts for fuel, servicing, insurance, registration and any loan interest), and the ATO can disallow the deduction, or the whole claim, without them. Anyone who can't keep both sets of records is better off with the cents-per-km method, even if it claims less.
Is choosing the right ATO method the same discipline as getting GST maths right?
Yes, same underlying habit, different mechanism. Our GST subtraction guide covers the exact-formula-not-the-intuitive-shortcut discipline for pulling GST out of a total; this page is the same discipline applied to picking the ATO-correct vehicle deduction method instead.
Sources
ATO cents-per-kilometre method (5,000 km cap, eligibility, bundled expenses), quoted directly: ato.gov.au, Cents per kilometre method. The 2026–27 rate (91¢/km): this site's own ute cost per km calculator, already fact-checked against the same ATO determination. ATO logbook method rules (12-week logbook, five-year validity, claimable expenses), quoted directly: ato.gov.au, Logbook method. Car limit for depreciation, 2026–27 ($69,883), quoted directly: ato.gov.au, Car thresholds from 1 July. Full vehicle ownership example (Toyota HiLux Rogue 48V drive-away price, residual value, fuel, servicing and registration/insurance costs): RACQ, Running costs 2025. All fetched July 2026.