What’s the change?
Effective 1 July 2026, the cents per kilometre deduction rate for work-related car expenses has been increased to 91 cents per kilometre. This is a temporary uplift of 2¢ above the base rate of 89¢ set for 2026-27.(softwaredevelopers.ato.gov.au) The new rate applies across the board to all eligible taxpayers who opt for the cents-per-kilometre method for work-related car travel deductions.
How does it work?
- You can use this rate only if you don’t have odometer records and you choose the simplified cents-per-kilometre option. If you use actual costs (fuel, depreciation, etc.), different rules apply.
- The rate is valid for the 2026-27 income year. For future years, it will revert to base 89¢ and be indexed yearly.(softwaredevelopers.ato.gov.au)
- You can claim up to 5,000 kilometres per car per year using this method.
Example calculation
If Latisha has 4,000 kilometres of work travel in 2026-27 and opts for the cents-per-kilometre method, her deduction would be:
4,000 km × $0.91 = $3,640
If she used the actual cost method, her deduction could be higher — but requires keeping detailed logbooks, receipts, depreciation schedules, etc.
Pros & cons: Which approach is right for you?
Simplified (cents per km):
- ✔ Easier documentation, less admin
- ✔ No need to keep logbooks or actual costs
- ✘ Might be lower than actual costs if you have high maintenance or fuel costs
Actual costs method:
- ✔ Potentially more beneficial if your total costs exceed what cents-per-km gives
- ✘ Requires accurate records, logbooks, depreciation calculations
Common pitfalls to avoid
- Exceeding the 5,000 km cap per vehicle collapse or being audited
- Using cents-per-kilometre method and claiming actual costs — you may only pick one method per car for the year
- Not adjusting for periods of leave, business travel, or when vehicle not used for work
What you should do now
- Keep accurate travel records throughout the year — note odometer readings when plausible even if you choose the simplified method
- Review which method maximises your deduction
- If using actual costs method, maintain logbooks and receipts for fuel, maintenance, insurance, depreciation.
Why it matters
While this might be a smaller change compared to super reforms, for employees, sole traders, and contractors who drive for work, every few cents counts—especially if you travel frequently. Ensuring you pick the right method ensures you’re not leaving deductions on the table while staying compliant.