The 2025 tax season is here, and if you use your car for work or business, it’s time to make sure you’re claiming your motor vehicle expenses correctly. For many Australians, their vehicle is essential to getting the job done. Still, if you’re not using the proper method to claim those expenses, you could be leaving money on the table… or worse, opening up to an audit.
The pressure is on with the ATO laser-focused on recovering unpaid tax debt and leveraging technology to flag incorrect deductions. So let’s break down the two main ways you can claim your motor vehicle, and help you figure out which one’s right for you.
The Two Main Methods
Cents Per Kilometre Method
This one is straightforward and best for those who use their car infrequently or for short work-related trips. You can claim up to 5,000 kilometres per car per financial year. The ATO sets a yearly fixed rate for all car-related costs, such as fuel, servicing, insurance, depreciation, etc.
For FY25, that rate is 88 cents per kilometre. So if you’ve done 1,000 work-related kilometres, you can claim $880 — no receipts needed, but you need to keep a record of your trips.
It’s quick, it’s easy… but it’s limited.
Logbook Method
The real deductions come in here, but it takes more effort. The logbook method is ideal for using your car for work or business. You record every trip over 12 weeks, noting the purpose, location, and distance for business and private use.
At the end of that period, you determine what percentage of your total driving is for business, and apply that percentage to all your car expenses: petrol, maintenance, rego, insurance, depreciation, and even interest on a car loan.
A solid logbook can easily unlock thousands in deductions if done correctly.
The Rules That Matter
The ATO is actively checking this stuff now, including calling employers to verify logbooks.
Here are some of the biggest red flags they’re looking for.
- Incomplete or vague logbooks
- Logbooks not kept for a full 12 weeks
- Old logbooks (over 5 years or no longer representative of current travel)
- Mismatched records (e.g. taking annual leave during claimed business travel)
- No opening and closing odometer readings
And remember: travel from home to work is not deductible. That’s considered private use. But trips from your office to a client meeting or supplier? That’s fair game.
Learn more directly from the source via the ATO’s car expense guide.
Which Method Is Right for You?
Use Cents Per Kilometre if:
- You drive less than 5,000km per year for work
- You want a quick and simple way to claim
- You don’t have a lot of receipts or detailed records
Use the Logbook Method if:
- You drive more than 5,000km per year for business
- You want to claim all your actual expenses
- You’re willing to keep records and do the work up front to maximise your return
Special Note for EV Drivers
If you drive an electric vehicle and charge it at home, you can’t just claim fuel costs. Instead, the ATO allows a flat rate of 4.2 cents per kilometre for at-home charging unless you use a commercial charger (with receipts).
Want to calculate your charging cost? Try the Home Charging Calculator from the Green Vehicle Guide.
Final Thoughts
Claiming car expenses the right way can save you significantly at tax time. But get it wrong, and you could be setting yourself up for unnecessary stress and a potential audit.
Don’t take the risk.
Are you unsure which method is right for you? Do you need help organising your logbook or understanding what you can legally claim?
Get in touch with us. We’re here to guide you through it and ensure everything is done properly.