Compliance
Carrying Costs & Kilometres: Updates to Vehicle-Based Deductions in 2026
Calculating vehicle expense deductions just got cheaper: the cents-per-kilometre rate rises to 91¢ from 1 July 2026. If you use your car for work, here’s what that means—and whether you should switch deduction methods.
By NomadicTax Research Team • 5-8 min read • July 31, 2026
## Why the Change Matters
If you're claiming car expenses using the **cents-per-kilometre method**, your rate has increased from 89¢ to **91¢ per kilometre** for the 2026-27 income year. This is a modest increase, but over numerous trips it adds up, especially for remote or mobile workers. ([softwaredevelopers.ato.gov.au](https://softwaredevelopers.ato.gov.au/CentsperKilometreDeductionRateforCarExpenses?utm_source=openai))
## Two Methods: Which One Works Best
| Method | What it covers | When it’s worthwhile |
|--------|----------------|------------------------|
| **Cents-per-kilometre** | Fixed rate per business kilometre up to a capped limit—no need for receipts. | Best if you travel modest distances and car expenses (fuel, maintenance, depreciation) are small relative to earnings. |
| **Logbook method** | Actual costs proportioned to business use—needs detailed record-keeping. | Superior when business usage is high or expenses are substantial. |
## Actionable Tips
- If you primarily use the cents method, update your payroll or tax software to use the **91¢ rate**.
- Keep good records of odometer readings and trips—limit still applies.
- If you occasionally use your car for work, compare your actual costs vs cents method to see which gives greater deduction.
- For contractors, mobile workers, or gig economy participants, it may be more beneficial to maintain a logbook if travel is frequent.
## Example Comparison
Suppose you drive 10,000 business kilometres in a year.
- At **89¢/km**, that equals **$8,900** deduction.
- At **91¢/km**, it becomes **$9,100** — an extra $200.
If your total car expenses (fuel, wear and tear, insurance) are $12,000 for business use, and your business percentage is 80%, logbook method gives $9,600 deduction. In that case, logbook still wins.
## Things to Watch Out For
- The **cents-per-kilometre method** is capped (for example, 5,000 business km commonly) so for high-mileage users it may not apply.
- Must elect to use the cents method and meet eligibility requirements.
- If changing methods, documentation helps in case of audit.
## Conclusion
While not a high-stakes reform, the updated rate is a useful reminder to review how you claim vehicle deductions. For some taxpayers, switching to the logbook method or revisiting travel usage could yield better tax outcomes.