ATO Cents-per-km Rate 2025-26: 88¢/km, 5,000 km Cap
The Australian Taxation Office's cents-per-km rate for the 2025-26 financial year (1 July 2025 to 30 June 2026) is 88 cents per business kilometre. The method is capped at 5,000 business kilometres per car per year. Beyond that ceiling, drivers must switch to the logbook method to claim more.
How the 5,000 km cap works
The cap is per car, per financial year, per driver. If you drive two cars for business in the same year, each gets its own 5,000 km allowance under the cents-per-km method, and you can claim up to 5,000 × $0.88 = $4,400 per car (so up to $8,800 total for two cars).
Once a single car passes 5,000 business kilometres in a financial year, every additional kilometre cannot be claimed under the cents-per-km method. The remaining options are: switch to the logbook method for that car (which requires a 12-week representative logbook), or stop claiming.
Who can use cents-per-km
Sole traders, employees claiming work-related car expenses, and partners in partnerships using their personal car for business. The cents-per-km method is the simpler of the two ATO-approved methods; the other is the logbook method.
Cents-per-km does not require receipts for fuel, maintenance, or insurance. The 88-cent rate is meant to cover all operating costs of running a personal vehicle for business.
When the cap matters
If your annual business driving is 5,000 km or less, cents-per-km is the simpler choice and produces a deduction equal to actual kilometres × 88 cents.
If your annual business driving substantially exceeds 5,000 km, the logbook method usually produces a larger deduction. A driver covering 12,000 business km per year would claim $4,400 under cents-per-km but could claim significantly more under logbook if their actual annual vehicle costs (gas, insurance, registration, depreciation) prorated by business-use percentage exceed that amount.
FAQ
Does the 5,000 km cap reset each year?
Yes. The cap is per financial year (1 July to 30 June). On 1 July a new 5,000 km cap starts.
Can I switch between methods year to year?
Yes. Each financial year is independent. You can use cents-per-km in one year and logbook in the next, depending on which is more advantageous for your driving pattern.
What if I drive more than 5,000 km but did not keep a logbook?
Without a logbook, you are capped at 5,000 km × 88 cents = $4,400 for that car for that year. The logbook must be a 12-week representative period, ideally started before the additional driving so it covers the actual usage pattern. Without it, the additional kilometres are not claimable.
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