The ATO has published twice in three weeks on motor vehicle claims — once on getting them right, once on busting myths about the cents per kilometre method. When the ATO repeats itself, it is usually because the same error keeps arriving in returns.
Here is the error: treating 5,000 kilometres as a number you are entitled to rather than a cap on a number you have to be able to justify.
How the two methods work
Cents per kilometre. You claim a flat rate for each business kilometre, up to 5,000 kilometres per car, per year. The rate is 91 cents for 2026-27, and 88 cents for 2025-26 — that second figure is the one on the returns we are lodging right now.
The rate is designed to cover everything: fuel, registration, insurance, servicing, tyres and depreciation. You cannot claim the rate and then claim running costs on top. That is the single most common misunderstanding.
Logbook. No kilometre cap. You keep a logbook for 12 continuous weeks, work out your business-use percentage, and claim that percentage of your actual costs including depreciation. More work, and for anyone genuinely driving above 5,000 business kilometres it is usually worth considerably more.
The part people skip
Cents per kilometre does not require receipts. It does require you to be able to show how you arrived at the kilometres.
That is not the same as nothing. If the ATO asks, "how did you get to 5,000?", a reasonable answer looks like this: three site visits a week, about 18 kilometres each way, roughly 44 working weeks. That is a calculation anyone can follow, and it holds up.
An unreasonable answer is "5,000". A round number at exactly the cap, with no pattern behind it, is the easiest adjustment an auditor makes all day — and it is usually adjusted to nil, not to something smaller.
A diary covering a representative period, or a note of your regular pattern of trips, costs you nothing and settles the question permanently.
What does not count, and never has
Travel between home and work is private, no matter how far you live from the job, how early the start is, or whether there was public transport available. This is the other half of what the ATO keeps writing about.
There are genuine exceptions — carrying bulky tools you cannot leave on site, travelling between two separate workplaces on the same day, going from your workplace to a client and back. If one of those applies to you, tell us, because the exception has conditions and we need the detail to claim it safely.
If you use the car in a business
Sole traders claim through the business schedule rather than as a work-related expense, but the methods and the 5,000 kilometre cap work the same way. If the car is owned by a company or trust and a director uses it privately, you are in fringe benefits tax territory instead, which is a different conversation and one worth having before year end rather than after.
If you are a USQ client, send us your kilometre estimate with the working behind it — the pattern, not just the total. It takes you one line and it is the difference between a claim that stands and a claim that gets removed.
This is general information, not personal tax advice. Your circumstances change the answer — please talk to us before acting on it.