Car and travel deductions: the $4,400 claim, the commute myth, and the record the ATO now wants (2025-26)

Work-related car expenses are one of the biggest deductions Australians claim — and this tax time they’re one of the ATO’s headline focus areas. It’s reported that the ATO emailed a warning to more than 500,000 taxpayers about their car claims, with Assistant Commissioner Anita Challen saying the ATO is watching car expense claims more closely than ever, with a strong focus where claims may be incorrect or excessive.

The wrong response is to shrink your claim. Plenty of people are already under-claiming — they don’t realise the trip between their two jobs counts, or they’re using the simple method when the logbook would have been worth thousands more. The right response is to claim everything you’re entitled to and be able to show how you got there.

Here’s the money on the table. Using the simple method, you can claim up to 5,000 work-related kilometres per car:

	Rate	Cap	Maximum deduction
FY2025-26 — the return you’re lodging now	88c/km	5,000 km	$4,400
FY2026-27 — from 1 July 2026	91c/km	5,000 km	$4,550

One important framing before we go further: $4,400 is the deduction, not the refund. A deduction reduces your taxable income, so what comes back is the deduction multiplied by your marginal rate. On a $90,000 salary — 30% tax plus the 2% Medicare levy — a $4,400 deduction is worth roughly $1,400 back. Real money, but not $4,400.

1. The commute: why the drive to work isn’t deductible — and the exceptions that beat it

Start with the rule that surprises the most people: your first trip from home to work, and your last trip home, are private. Not deductible. It doesn’t matter that you drive 60 kilometres each way, that there’s no public transport, that you start at 5am, or that you’re on call. The law treats getting yourself to your job as the cost of being available for work, not a cost of doing it.

But there are genuine exceptions, and this is where people leave money behind.

Bulky or heavy equipment. If you have to cart bulky equipment between home and work, that travel may be deductible — but the test is strict, and all of it has to hold:

the equipment is essential to performing your duties;
it’s bulky enough that transporting it by private vehicle is the only realistic option; and
carrying it is a practical necessity — because there’s no secure storage provided at work, or because it has to go to a different site each day.

The trap is the third limb. If your employer does provide a secure lock-up and you take your toolkit home anyway, that’s convenience or personal choice — and the trip stays private. The “tools must weigh at least 20 kg” figure you’ll hear quoted is a rule of thumb, not law.

Itinerant work. If you have genuinely shifting places of work — travel is a fundamental part of the job, you regularly visit more than one site in a day before heading home, and there’s real uncertainty about where you’ll be working next — your travel from home may be deductible. Think of a technician with a run of jobs, not an office worker who occasionally visits a client.

Travelling between two separate jobs. If you work for two employers and drive directly from job one to job two on the same day, that trip is deductible. Note the asymmetry: the drive from the second job home is not.

Travelling to an alternate workplace. From your regular workplace to a client’s premises, a supplier or a conference — deductible. And from home directly to an alternate workplace, such as a training venue, and back again — also deductible.

On top of those, the ordinary work trips people forget to claim: travel between two workplaces of the same employer, and trips run in the course of your duties — the bank run, the post office, collecting supplies.

2. Cents per kilometre vs logbook: which one is actually bigger?

You must choose one method per car, per year. Most people default to the simple one and never check the alternative. That’s often an expensive habit.

Cents per kilometre gives you 88c per work kilometre for FY2025-26 (91c from 1 July 2026), capped at 5,000 kilometres per car. The critical detail: the rate is all-inclusive. Fuel, registration, insurance, servicing, tyres and depreciation are all baked into it. You cannot add anything on top. Its ceiling is hard — $4,400 this year, $4,550 next.

The logbook method has no cap. You keep a logbook for 12 continuous weeks that’s representative of your year’s driving, recording for each trip the date, the start and end odometer readings, the kilometres and the reason. That produces a business-use percentage, which you then apply to all your actual running costs for the year — fuel, servicing, insurance, registration, tyres, and, crucially, depreciation and loan interest.

Those last two are why the logbook so often wins. On a newer or financed car, depreciation and interest alone can dwarf the entire $4,400 cap.

And the effort is smaller than it looks: a logbook is valid for 5 years, as long as your driving pattern stays broadly the same. In each of the following four years you only need odometer readings at the start and end of the period you owned the car. Change jobs or move house and it may no longer be representative — then you start a fresh 12 weeks.

The rough crossover: once you’re past about 5,000 work kilometres, or your car is new, expensive or financed, the logbook usually wins — sometimes by thousands. Below that, cents per kilometre is simpler and usually close enough. Run both once, then choose.

One hard limit worth knowing now: you can’t create a logbook for a year that’s already finished. If you didn’t keep one for FY2025-26, cents per kilometre is your only option on the return in front of you. But you can start a logbook today and have it working for FY2026-27 — and for the four years after that.

3. “Under 5,000 km means I don’t need records” — the myth that fails a check

This is the single most common misunderstanding in the whole topic, and it’s the one the ATO is actively hunting.

What’s true: under the cents per kilometre method, you do not need written evidence — receipts — for your actual car costs. That’s the whole point of the simple method.

What’s false: the idea that this means no records at all. You still need a record showing how you worked out your work-related kilometres. That can be a diary of your work trips, a logging app, or a reasonable, documented calculation — the ATO’s own style of example being something like a 20 km round trip to a second site, 48 working weeks a year, so 960 kilometres.

The pattern drawing attention is exactly the one you’d expect: the full 5,000 kilometres claimed year after year, with nothing behind it. “No receipts required” was never “no records required”.

If you’re using the logbook method, keep the logbook itself, your odometer readings, and written evidence for the actual expenses you’re apportioning. Either way, hold your records for 5 years from the date you lodge, in most cases.

4. “I get a car allowance on my payslip — can’t I just claim it?”

No — and this catches a lot of people, in both directions.

A car allowance is assessable income. It shows on your income statement and it is taxed like the rest of your pay. It is not tax-free money, and it is not a pre-approved deduction.

Receiving an allowance does not create an entitlement and does not replace records. The two numbers are entirely independent: you claim what you actually incurred on work travel, using cents per kilometre or the logbook, and only to the extent you can substantiate it. Your legitimate claim might be more than the allowance — or less.

The classic error sounds reasonable and isn’t: “my employer paid me an allowance for 5,000 kilometres, so I’ll claim 5,000 kilometres.” The allowance tells you nothing about how far you actually drove for work.

Two related points worth knowing:

If it isn’t your car, you generally can’t claim it. A novated-lease, salary-packaged or employer-provided vehicle is dealt with under the FBT rules, not through your deductions. Costs your employer reimburses aren’t deductible to you either — you didn’t bear them.

And check that your vehicle is even a “car”. For these rules, a car is designed to carry less than 1 tonne and fewer than 9 passengers including the driver. A ute or van rated at 1 tonne or more, a minibus seating 9 or more, or a motorcycle isn’t a car — cents per kilometre and the logbook don’t apply at all. You claim the actual work-related costs instead, as a work-related travel expense. For tradespeople with a big ute, that’s frequently a larger claim than the one they’ve been making.

5. Overnight work travel: a different rule set entirely

Once work requires you to sleep away from home, you’re out of the car rules and into travel expenses. Airfares, accommodation, meals and incidentals may all be deductible.

Here’s the part worth knowing: there’s a substantiation exception. If you receive a bona fide travel allowance from your employer and your claim stays within the ATO’s reasonable amounts, you don’t need to keep written evidence for those expenses. For FY2025-26 the reasonable amounts are set in TD 2025/4, across three salary bands — up to $148,250, $148,251 to $263,850, and $263,851 and above — varying by destination. The overtime meal allowance amount for FY2025-26 is $38.65. A new determination sets the FY2026-27 amounts, so check the current one before you claim next year.

But the exception is far narrower than most people assume:

You must have actually spent the money. The reasonable amount is not a per-diem you can pocket. The ATO can still ask you to show that you incurred the expense.
No allowance means no exception. If your employer doesn’t pay a travel allowance, keep every receipt.
Overseas accommodation always needs written evidence. There is no reasonable-amount exception for it — overseas reasonable amounts cover food, drink and incidentals only.
Six or more consecutive nights away means a travel diary. For overseas travel of six-plus nights, that record is required whether or not the substantiation exception applies to your meals.

And apportion honestly. A conference with a holiday attached is partly deductible and partly not. A partner’s or family member’s costs never are.

The bottom line

This topic cuts both ways, and most people only hear one side of it. The commute isn’t deductible no matter how far you drive — but the trip between your two jobs, the drive to a client, the run between worksites, and overnight work travel are, and those get missed constantly.

So do three things before you lodge. Check which method is actually bigger for your car rather than repeating last year out of habit. Start a logbook now if you’re anywhere near 5,000 work kilometres — it’s twelve weeks of effort for five years of deductions. And keep the one thing the ATO is asking for this year: the record that shows how you arrived at your number.

General information only, current as at July 2026. The 88c per kilometre rate applies to the 2025-26 income year; 91c applies from 1 July 2026 for 2026-27. Reasonable travel allowance amounts for 2025-26 are set in TD 2025/4. Whether any of these deductions are available to you depends on your own circumstances — your duties, your vehicle, your employer’s arrangements and your records — and rates, thresholds and rules can change. Confirm the current-year detail for your own facts before you lodge.

Epic Tax — Always a step ahead.