Sole Trader Car Deductions: Logbook vs Cents per Km (2025–26)
Compare the ATO logbook and cents per kilometre methods for sole traders, with worked examples and a simple rule for which car deduction method saves you more at tax time.
If you are a sole trader who uses your own car for work, the ATO gives you two approved ways to claim your car expenses: the cents per kilometre method and the logbook method. Pick the wrong one and you can leave hundreds — sometimes thousands — of dollars on the table at tax time. Here is how each works, side by side, and a simple rule for choosing.
Prefer to see your own figures? Use the free car deduction calculator — it runs both methods side by side and shows the tax you’d actually save.
The two ATO methods compared
| Cents per kilometre | Logbook method | |
|---|---|---|
| Claim rate | 88c per business km | Business-use % of actual costs |
| Limit | Capped at 5,000 km/year ($4,400) | No cap on km or claim amount |
| Covers | Fuel, servicing, rego, insurance, depreciation | You claim these actual costs separately |
| Receipts? | Not required | Required (running costs + depreciation) |
| Records | Diary of typical business trips | 12-week logbook + odometer readings |
The cents per kilometre rate is 88 cents for the 2024–25 and 2025–26 income years, capped at 5,000 business kilometres ($4,400). Always confirm the current rate on the ATO’s cents per kilometre method page.
Worked example 1 — the light driver
Maria is a freelance photographer. She drives about 3,000 business km a year. Her car costs roughly $12,000 a year to run (including depreciation), and her logbook shows 25% business use.
- Cents per km: 3,000 km × $0.88 = $2,640 (no receipts, minimal admin).
- Logbook: 25% × $12,000 ≈ $3,000 (requires a full year of receipts and a 12-week logbook).
The verdict: the logbook returns roughly $360 more. For a light driver, the honest question is whether a year of receipt-keeping is worth a few hundred dollars — many in Maria’s position pragmatically choose the simpler cents-per-km claim.
Worked example 2 — the heavy driver
Sam is a sole-trader electrician. He drives 9,000 business km out of 15,000 total (60% business use). His car costs about $11,000 a year to run, plus depreciation.
- Cents per km: capped at 5,000 km. 5,000 × $0.88 = $4,400. His other 4,000 business km earn nothing.
- Logbook: 60% × $11,000 ≈ $6,600 in running costs, plus 60% of his depreciation — comfortably $7,000 or more.
The verdict: for Sam the logbook is worth $2,600+ more, every year. Once you are well over 5,000 business km, the cents-per-km cap quietly costs you money.
The simple rule for sole traders
The 5,000 km cap is the deciding factor:
- Over ~5,000 business km (or high running costs): the logbook almost always wins, because cents per km is capped at $4,400. Keep the records; the extra deduction pays for the paperwork.
- Under ~5,000 business km: it is a closer race. If you would rather not keep a year of receipts, cents per km is the practical choice.
Tip: you can switch methods from year to year, but you must use one method per car for the whole financial year. (Switching can also trigger a depreciation balancing adjustment — worth checking before you change.)
What counts as a business kilometre?
Business kilometres are trips taken to earn your income — visiting clients, travelling between work sites, or collecting supplies. Two common traps are not deductible:
- Your daily commute: travel from home to a regular workplace is private travel, even for a sole trader.
- Private trips: the school run or grabbing groceries does not count, even in a sign-written vehicle.
If your home is your genuine, principal place of business, trips directly from home to clients or job sites can count as business travel — because you are travelling from one workplace to another, not commuting. The “principal place of business” test is strict, so make sure it genuinely applies before relying on it.
Bottom line
Estimate your business kilometres honestly. If you are over about 5,000 a year, the logbook is almost always the bigger deduction and worth the records. Under that, weigh the extra dollars against a year of receipt-keeping — and remember you can reassess each year.
Frequently Asked Questions
What is the ATO cents per km rate for 2025-26?
The rate is 88 cents per business kilometre for the 2025-26 income year, capped at a maximum of 5,000 km per car. The highest possible deduction using this method is $4,400.
Can I swap between the logbook and cents per km method?
Yes, you can change methods from year to year depending on which gives the better deduction. However, you must use one method per car for the full financial year, and switching can trigger a depreciation balancing adjustment.
Do I need receipts for the cents per km method?
No receipts are required for fuel or maintenance under the cents per km method. You must still be able to show how you reasonably worked out your business kilometres — for example, a diary of typical trips — if the ATO asks.
How long is a logbook valid?
A continuous 12-week logbook stays valid for five years, provided your business-use pattern does not change significantly in that time.