Car and vehicle expenses are one of the most commonly claimed deductions on Australian tax returns — and one of the most commonly claimed incorrectly. The fundamental rule is that travel from home to your usual workplace is not deductible — it is private travel. Deductible car use begins once you are already at a work location, or when you travel to a location that is not your normal base.
The Key Rule — Home to Work Is Private Travel
The ATO is clear: travelling from home to your regular workplace is not deductible, regardless of how far you live from work, whether you carry tools, or whether your employer does not provide parking.
| Journey type | Deductible? |
|---|---|
| Home to regular workplace | No |
| Workplace to home | No |
| Between two separate workplaces on the same day | Yes |
| Home to a client site (when there is no fixed work base) | Generally yes — seek specific advice |
| Home to a different workplace from your usual one | Yes |
| Transporting bulky equipment that cannot be stored at work | Yes (specific ATO concession) |
| Attending work-related training at an external venue | Yes |
| Carrying heavy tools required for work (no secure storage at site) | Yes |
Two Methods for Claiming Car Expenses
Method 1 — Cents per Kilometre (Simpler)
- Claim 88 cents per kilometre of work-related travel (FY2025–26)
- Maximum: 5,000 kilometres per year
- Maximum deduction: $4,400 per year under this method
- No logbook required — but written evidence of work trips is good practice
- Covers all running costs: petrol, oil, tyres, servicing, registration, insurance, depreciation
When to use: Lower mileage, simple use, or when you want to avoid the logbook requirement.
Method 2 — Logbook Method (More Comprehensive)
- Requires a valid 12-week logbook showing all trips (work and private)
- Calculates your business-use percentage
- You claim that percentage of all actual vehicle running costs: fuel, oil, servicing, registration, CTP, insurance, parking on work trips, tolls on work trips, and depreciation
- Must also record odometer readings at start and end of each year
- Logbook is valid for 5 years (unless circumstances change significantly — new car, change in work use)
When to use: Higher mileage workers, people who travel extensively for work, or when actual costs significantly exceed the cents-per-km limit.
Choosing the Right Method
| Factor | Cents per km | Logbook |
|---|---|---|
| Annual work kilometres | Under ~3,000–4,000 | Over 4,000 |
| Record-keeping effort | Minimal | Logbook + receipts |
| Covers depreciation | Yes (within the rate) | Yes (separately calculated) |
| Maximum deduction | $4,400 | No set maximum |
| Car cost matters | No | Yes (affects depreciation) |
Eligible Vehicles
Both methods apply to cars — defined by the ATO as motor vehicles (excluding motorcycles) designed to carry fewer than 9 passengers, with a carrying capacity of less than 1 tonne. For motorcycles and larger vehicles, different rules may apply.
Parking and Tolls
- Work-related parking (at a client site, not at your employer’s normal work location) — deductible in addition to the cents/km rate under the logbook method; included in the fixed rate under cents/km
- Toll charges on work journeys — deductible
What You Cannot Claim
- The home-to-work commute (the single biggest disallowed claim in ATO data)
- Parking at your normal workplace (considered private)
- Fines (speeding, parking fines)
- The cost of a car you do not actually use for work
Frequently Asked Questions
I carry tools to work sites every day. Is my commute deductible? There is an ATO concession for employees who carry bulky tools or equipment that cannot be stored at the work site. If the tools are genuinely bulky, necessary, and there is no secure storage at the employer’s premises, the travel from home to site may be deductible. You need to be able to substantiate the bulky equipment claim.
I have two jobs. Can I deduct travel between them? Yes. Travel directly between two separate workplaces (without going home in between) is deductible.
I drive a ute for work. Which method applies? A ute (dual-cab utility) with a payload of 1 tonne or more is not a “car” under ATO rules. Different deduction rules apply for commercial vehicles. The cents-per-km rate only applies to cars. Check ATO guidance for your specific vehicle type.
My employer pays a car allowance. Do I still claim? Include the allowance as income (it should appear on your income statement). Then claim the actual work-related vehicle expenses. If your expenses exceed the allowance, you deduct the excess. If the allowance exceeds your expenses, you pay tax on the difference.
This article provides general tax information. For advice tailored to your situation, speak with a registered tax agent. Find one through the Tax Practitioners Board register.