Australia's cents per kilometre method: 91c and the 5,000 km cap

Australia treats work driving in a car you own or lease in a way that looks familiar to anyone used to HMRC's approved mileage rates, a flat amount per unit of distance, and then quietly does something quite different at the top end. The flat rate only counts the first 5,000 work kilometres, and anyone who wants to claim for more has to switch to a different method.

The rate

The Australian Taxation Office sets a single rate for the cents per kilometre method each income year:

The Australian income year runs from 1 July to 30 June, so 2025-26 is the year that ended on 30 June 2026 and 2026-27 is the year that began on 1 July 2026. The rate is set by legislative instrument, so check the ATO's figure for the year you are actually claiming rather than assuming last year's carries over.

There is one rate for every car. No split by engine size, no separate figure for electric vehicles, no taper. That is simpler than most of the systems Milometry covers.

What the rate covers

The rate is meant to account for all of your car's running costs: fuel, servicing, registration, insurance, tyres and depreciation. You cannot claim any of those separately on top of it. If you claim cents per kilometre, the rate is the whole claim for that car.

The 5,000 km ceiling

This is the part that catches people out. You can claim a maximum of 5,000 work kilometres per car under the method. At 91c that caps the claim at $4,550 for a car in 2026-27 (at 88c in 2025-26 it was $4,400).

If you drove 9,000 work kilometres you can still use cents per kilometre, but only 5,000 of them count. To claim for all 9,000 you would need the logbook method, which covers the whole claim for that car rather than topping up the first 5,000. Cents per kilometre is designed for occasional work driving, not for people who live in the car.

The cap is per car, so two cars used for work can each be claimed under the method, with their own 5,000 km limit.

Which vehicles qualify

The method is for cars. It cannot be used for a vehicle with a carrying capacity of one tonne or more, or one designed to carry nine or more passengers, which rules out many utes, larger vans and minibuses. Those follow different rules, generally claiming actual costs with records to support the work share.

What records you need

You do not need receipts under cents per kilometre. You do need to be able to show:

• That you own or lease the car
• How you worked out your work kilometres

The ATO accepts a diary or similar record for the second point. What it will not accept is a round number with nothing behind it. "About 5,000" on a claim that sits exactly on the cap is the kind of figure that invites questions.

A trip record with a date, a start and end point and a reason for each journey answers the question before it is asked.

The logbook method

For heavier work use, the logbook method claims the work percentage of the car's actual running costs. The rules are specific:

• Keep a logbook for at least 12 continuous weeks that are representative of your travel across the year
• Record each work journey with its destination and purpose, the odometer readings at the start and end, and the distance
• Record odometer readings at the start and end of the logbook period, and at the start and end of each income year you rely on it
• Keep receipts for the actual costs you claim, fuel, servicing, insurance, registration, interest and depreciation among them

A logbook can support claims for up to five years, provided your pattern of use has not materially changed, and you keep the logbook and records for five years from when you lodge the return for the last income year you rely on it.

Which method comes out ahead

There is no general answer, which is why the ATO lets you choose each year.

Cents per kilometre tends to suit a modest, efficient car doing a moderate amount of work driving, because the flat rate can exceed what that car actually costs to run per kilometre. The logbook tends to suit a more expensive car, or anyone well over 5,000 work kilometres, because the claim tracks real costs and has no distance ceiling.

The only way to know for your own car is to have the numbers for both: the work kilometres, the total kilometres, and the running costs. Which is an argument for recording journeys properly from the start of the year rather than reconstructing them in July.

How it compares with the UK

The structure is worth setting against the HMRC approved mileage rates. The UK pays 55p a mile for the first 10,000 business miles in a tax year and 25p a mile after that, since 6 April 2026, and there is no point at which the flat rate stops applying. Australia's flat rate simply stops counting at 5,000 kilometres; beyond that, only the logbook method reflects the extra distance.

They are also different kinds of relief. In the UK the rate governs what an employer can pay you tax free, and if they pay less you can claim tax relief on the gap (Mileage Allowance Relief). In Australia it is a deduction an individual calculates on their own tax return, against their income. Both reward the same thing, though: a record made at the time.

Commuting still does not count

As in the UK, ordinary travel between home and your regular place of work is generally private in Australia and cannot be claimed under either method. Work kilometres are the trips made for the job itself: between workplaces, to clients, to alternative work locations.

Sources

• Cents per kilometre method (ATO)
• Logbook method (ATO)
• Increasing mileage rates (HMRC policy paper), for the British comparison
• D1 Work-related car expenses 2026 (ATO)

General information, not legal or tax advice. Australian car expense rules have conditions this article does not cover: check the ATO guidance or take advice on your own situation.