ATO 91 Cents per Kilometre Rate: Australian Car Expense Deductions for 2026–27

The Australian Taxation Office’s cents per kilometre rate increased to 91 cents from 1 July 2026, creating a simple but often misunderstood deduction for employees and sole traders who use their cars for work or business.

The new rate matters because vehicle costs have risen, but it does not mean every trip earns a 91-cent refund. The deduction is available only for eligible work-related kilometres, is capped at 5,000 kilometres per car, and must be supported by a reasonable calculation. Commuting from home to a normal workplace usually remains private.

This guide explains the 2026–27 rules, compares the cents per kilometre and logbook methods, and shows how the numbers work in Australian dollars.

What changed on 1 July 2026?

The ATO’s 2026 determination sets the rate at 91 cents for the 2026–27 income year. The figure comprises an indexed base rate of 89 cents and a temporary one-off uplift of two cents for 2026–27. Future indexation is intended to apply to the 89-cent base unless another determination changes the approach.

At the cap, the change adds $150 to the deduction calculation compared with 2025–26. Its cash value depends on the taxpayer’s marginal rate. It does not automatically produce a $150 larger refund.

What the 91 cents covers

The rate is designed to cover all deductible running costs of the car, including fuel, registration, insurance, servicing, repairs, tyres and depreciation. You cannot use 91 cents per kilometre and then separately claim those same expenses for that car.

Parking and road tolls associated with eligible work trips are different costs and may be separately deductible when the general deduction rules are satisfied. A parking fine is not deductible merely because it was incurred during work.

Who can use the Australian cents per kilometre method?

The method is primarily available to individuals, including employees and sole traders, who use a qualifying car to earn assessable income. A car generally means a motor vehicle designed to carry fewer than nine passengers and a load of less than one tonne.

Motorcycles and vehicles designed to carry one tonne or more are not treated as cars for this method. Actual expense rules may instead apply. Companies and trusts also cannot simply apply the individual cents per kilometre deduction to vehicles they own.

Employees

An employee may claim eligible travel that has a direct connection with earning employment income and has not been reimbursed by the employer. Common examples include:

• travelling directly between two separate workplaces
• visiting a client, worksite or temporary location from the regular workplace
• attending an off-site meeting, training session or conference
• travelling from home to an alternative workplace and then to the regular workplace, where the ATO rules support the connection
• performing genuinely itinerant work involving continual travel between locations.

Receiving a car allowance does not automatically make every kilometre deductible. The allowance is generally assessable income, while the deduction must independently satisfy the tax rules.

Sole traders

Sole traders may use the method for eligible business travel, subject to the same 5,000-kilometre limit per car. Trips to customers, suppliers, temporary job sites, the bank for business purposes or professional appointments can qualify when properly connected to the business.

A sole trader should separate business travel from private use. Calling a vehicle a “business car” does not convert school runs, holidays or ordinary private errands into deductions.

Which trips are deductible in Australia?

The purpose and pattern of travel matter more than the label placed on it.

Usually deductible travel

Travel between two workplaces is commonly deductible. For example, a physiotherapist employed at one clinic who drives directly to a second employer’s clinic may have an eligible trip. An accountant driving from the office to a client’s premises and back would generally have work kilometres.

Travel from a regular workplace to a temporary work location can also qualify. Good records should identify the date, origin, destination, kilometres and work purpose.

Usually non-deductible travel

Ordinary home-to-work travel is private. That generally remains true if:

• you work overtime or outside public transport hours
• you are on call
• you do minor tasks at home before leaving
• you live far from the workplace
• you carry a laptop, uniform or ordinary tools
• your employer pays an allowance.

The ATO examines exceptions narrowly. Genuinely bulky tools or equipment may support a deduction when the items are essential, difficult to transport and there is no secure storage at the workplace. Convenience is not enough.

Working from home does not automatically change commuting

A home office does not necessarily make the home a place of business. An employee who chooses to answer emails at home and then drives to the normal office usually still has a private commute. The facts are different where employment duties require travel between two genuine workplaces.

How to calculate a 2026–27 claim

The formula is straightforward:

Eligible business kilometres × $0.91 = deduction

*Illustrative income-tax effect only, excluding Medicare levy, offsets, HELP repayments and other circumstances.

Example: employee visiting client sites

Priya drives 64 kilometres each fortnight between her employer’s office and client sites over 46 working weeks. Her diary supports 1,472 eligible kilometres:

1,472 × $0.91 = $1,339.52

She would generally enter $1,340 after applying the tax-return rounding conventions. She cannot separately add fuel, insurance or servicing expenses for the same car under this method.

Example: kilometres exceed the cap

Liam, a sole trader, records 8,200 business kilometres in one car. The cents per kilometre method remains limited to 5,000 kilometres, producing a $4,550 deduction. He cannot claim the remaining 3,200 kilometres at 91 cents.

Liam should compare the logbook method, which may produce a higher deduction if his records and business-use percentage support it.

What records does the ATO require?

The cents method removes the formal logbook requirement, not the requirement for evidence. The ATO can ask how the taxpayer arrived at the number.

Useful evidence includes:

• diary or calendar entries showing work trips
• odometer readings at representative dates
• appointment, job-management or customer records
• employer rosters and worksite lists
• maps showing distances for recurring routes
• invoices, emails or meeting records supporting the purpose
• a spreadsheet that excludes private travel.

A round claim of exactly 5,000 kilometres without working papers can attract questions. Reconstructing a claim months later is less reliable than recording trips contemporaneously.

A practical weekly record

Record five details: date, start point, destination, reason and distance. If an identical trip recurs, document the route distance and count supported occurrences. Retain tax records for the period required by the ATO, generally five years after lodging, subject to exceptions.

Cents per kilometre versus the logbook method

The simplest method is not always the best method.

Under the logbook method, a representative 12-week logbook establishes the business-use percentage and can generally remain valid for five years unless the usage pattern changes materially. Odometer records and written evidence for actual expenses are still required.

Worked comparison

Assume a taxpayer drives 7,500 eligible business kilometres and 15,000 total kilometres. Actual annual car costs, including allowable depreciation, total $12,600. A valid logbook establishes 50% business use.

• Cents method: capped at $4,550
• Logbook method: 50% × $12,600 = $6,300

The logbook method is $1,750 higher in this example. However, the result changes with actual costs, business percentage and depreciation limits. Taxpayers should calculate both rather than assume.

Reimbursements and allowances

A reimbursement ordinarily means the employer repays a specific expense. An employee generally cannot claim the reimbursed amount because they have not ultimately borne the cost.

An allowance is different. It is usually reported as income, and the employee may claim a deduction only for eligible expenses actually incurred. If an employer pays 91 cents for 2,000 kilometres but only 1,400 kilometres satisfy the deduction rules, the tax claim does not become 2,000 kilometres merely because that amount was paid.

Employers should also distinguish the employee deduction rate from payroll and award obligations. The ATO rate is a tax calculation, not a universal legal reimbursement rate for every workplace.

Common mistakes that can trigger an ATO adjustment

Claiming the normal commute

This is the most common error. Starting work at home, being on call or carrying a laptop will not ordinarily transform the journey.

Double dipping

Taxpayers cannot claim 91 cents and separately claim fuel, registration, insurance, repairs or depreciation for the same car and period.

Treating an estimate as evidence

The method permits a reasonable calculation, not a guess. A calendar and route calculation are far stronger than an unsupported number selected at tax time.

Claiming kilometres that were reimbursed

If the employer fully reimbursed the expense, a further deduction generally creates a double benefit.

Applying the method to an ineligible vehicle or entity

Motorcycles, one-tonne vehicles, companies and trusts require different treatment. Ownership, lease arrangements and salary packaging can also change the analysis.

A checklist before lodging your 2026–27 return

1. Confirm the travel occurred between 1 July 2026 and 30 June 2027.
2. Separate ordinary commuting and private trips.
3. Confirm the vehicle qualifies as a car for this method.
4. Reconcile diary, calendar and appointment records.
5. Apply the 5,000-kilometre cap per car.
6. Remove kilometres or costs fully reimbursed by an employer.
7. Do not add expenses already covered by the 91-cent rate.
8. Compare the result with the logbook method if business use is substantial.
9. Retain the calculation and supporting evidence.

Getting the claim right

The 91-cent rate offers convenience, not a shortcut around substantiation. For a taxpayer with modest, well-documented work travel, it can be an efficient method. For a high-kilometre sole trader or an expensive vehicle, a logbook calculation may be materially better.

Vehicle ownership, reimbursements, multiple jobs and home-based businesses can complicate the rules. A registered tax agent can compare methods and document the position before lodgement. Find an Australian accountant or tax specialist through WealthWorks to review your 2026–27 car expense claim.

This article provides general information and does not constitute tax advice. Tax outcomes depend on individual facts and current law.