Car Tax 1: Cents Per Kilometer Method vs Logbook Method

Deduction for motor vehicle expenses :

Cents Per Kilometre method vs Logbook Method

There are two methods to claim car expenses: the cents per kilometre method and the logbook method. A vehicle is considered a ‘car’ if it carries a load of less than 1 tonne and fewer than 9 passengers (including the driver). Motorcycles and similar vehicles are not cars. Towing capacity is not what the ATO considers for the 1-tonne capacity either, it is actually the ‘gross vehicle mass’ minus the ‘kerb weight’ of the vehicle.

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Cents Per Kilometre Method

Multiply the number of work-related kilometres you travel in the car by the rate per kilometre for that income year. 

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2024FY: 85 cents per kilometre

2023FY: 78 cents per kilometre

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You can claim a maximum of 5,000 work-related kilometres per car.

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The cents per kilometre rate covers all car expenses such as fuel, insurance, and repairs.

You can’t add other expenses to the amount when you work out your deduction using this method.

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Cents per KM example:

You've traveled a total distance of 25 kilometres to visit your clients each week, and you've done this for 48 weeks out of the year, all using your own car. You can claim a deduction for your car expenses as follows:

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25 km x 48 weeks = 1,200 km (total trip kilometres)

1,200km x 85 cents = $1,020

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In the 2024FY, you can claim a $1,020 deduction using the cents per kilometre method.

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Logbook Method

The Logbook method requires a car owner to keep a logbook that shows work-related trips for a continuous period of at least 12 weeks (your logbook is valid for up to 5 income years) and keep receipts or other records of your car expenses (e.g. fuel, insurance, registration, depreciation).

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Note that there is a limit on the depreciation expense claimable for cars, set at $68,108 for the 2024 financial year and $64,741 for the 2023 financial year.

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Your logbook must 

• cover at least 12 continuous weeks 
• include the destination and purpose of every journey, the odometer reading at the start and end of each journey, and the total kilometres travelled during the period
• include odometer readings for the start and end of the logbook period.

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Logbook method example:

You’ve kept a logbook for 12 continuous weeks and the total kilometres were 4,500 km and the work-related kilometres were 3,150km. You’ve spent $7,000 in total on car expenses throughout the year. You can claim a deduction for your car expenses as follows:

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3,150 km (business use) / 4,500 km (total km) *100 = 70% (business use)

$7,000 x 70% = $4,900

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You can claim a $4,900 deduction by using the logbook method.

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While the cents per kilometre method offers simplicity in claiming deductions, the logbook method can be advantageous for individuals frequently undertaking business-related car travel, as it allows for a potentially higher deduction.

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CTK Accounting is a full-scope accounting firm based in Wollongong, servicing clients nationally.

For advice on Tax, BAS, GST, Bookkeeping, and Payroll issues visit us at ctkaccounting.com.au