Understanding the 91¢/km Rate
Australia’s ATO issued a new Cents per Kilometre Deduction Rate for Car Expenses, effective 1 July 2026, at 91 cents per kilometre for eligible taxpayers using the cents per kilometre method. (softwaredevelopers.ato.gov.au) This rate includes a temporary uptake of +2¢ for the 2026-27 income year, before returning to the indexed base rate of 89¢. (softwaredevelopers.ato.gov.au)
This method applies when you use your vehicle for work-related travel (excluding commuting), and you need to choose that method instead of actual cost method. The rate covers running costs (fuel, maintenance, insurance, registration), but not depreciation of the vehicle—that must be handled separately if using the actual cost method.
Who Should Use It?
- Individuals with modest car-usage: If you drive relatively few kilometres for work, the simplicity and certainty of cents per km might give a stronger benefit.
- Casual or gig workers: Those who don’t keep detailed logs across many vehicle expenses may prefer the minimal documentation required.
- Taxpayers with mixed use: If your car usage is partially private, cents per km allows estimation without tracking every single cost.
On the flip side, you might lose out if:
- You have very high running costs or many expensive expenses → actual cost method could produce a higher deduction.
- Your usage is complex (e.g., multiple vehicles, mixed business/private use, special circumstances) → record keeping can become limited.
How It Works in Practice
| Scenario | Distance driven work-related (year) | Using cents-per-km: estimation | Notes / Caveats |
|---|---|---|---|
| You drive 10,000 km | 10,000 × 91¢ = AUD 9,100 deduction | Solid outcome if costs avg more vs actual cost | |
| Actual costs higher (fuel, maintenance etc.) sum to $12,000 | Actual cost method likely better | ||
| Claiming under cents per km | No detailed cost breakdown needed, just a diary or record of journey log (distance, purpose, date) | ||
| Private trips included by mistake | Must adjust—only work-related km count |
Record Keeping & Compliance Tips
- Keep journey records: date, start + end locations, purpose of trip, kilometres. Electronic logs or apps help.
- Be accurate—ATO may audit: mixing work/private travel is common red flag.
- Once you choose cents per kilometre method, you can’t double-dip: you cannot claim the same expenses (fuel etc.) elsewhere if already covered in the cents rate.
When to Switch Methods
It makes sense to calculate both methods (actual vs cents) periodically—especially if you upgrade your vehicle, your usage changes (more work travel), or if fuel & maintenance costs rise. Revisiting annually ensures you don’t leave deductible value unclaimed.
Actionable Steps Right Now
- Estimate work-related km for past year.
- Check what other car expenses you paid (fuel, repairs, insurance).
- Compute both methods—cents vs actual—to see which leads to larger deduction.
- If cents method wins or is simpler, pick it before lodging.
- Keep accurate log or record to support your claim—anticipate ATO questions.
Using 91¢/km wisely could equate to hundreds to thousands of extra dollars back for many taxpayers—especially those who drive regularly for work without major vehicle expenses to claim separately.