Cents per Km Method in Detail If you drive a vehicle for work-related journeys, you can claim vehicle expenses from the Australian Taxation Office. You can either use the Cents per Km or Logbook Method, the former which we’ll explain in detail below. What is the Cents per Km Method? Australian taxpayers using a car for work-related travel are eligible for a tax deduction on every business kilometre travelled, as per the ATO’s guidelines. The Cents per Km Method is one of the approved systems for calculating your car expense deductions for tax purposes. It is based on the number of kilometres travelled in your car over a period of a year. Effectively, you can claim money back on each kilometre travelled for work-related purposes. How Does the Cents per Km Method Work? You log the start odometer reading of your car at the beginning of the financial year and keep a diary record of every trip you make which is work-related. At the end of the financial year, you log your end odometer reading and add up your total work-related kilometres travelled. You then calculate your tax claim based on the rate set by the ATO. There is no hard and fast rule about keeping a record of expenses since the set rate already considers all vehicle-related expenditures. However, you may be asked to explain how you have calculated your claim. Prefer to go Digital? Downloading the GOFAR app makes this process much more manageable. Once you have the app on your phone, plug in the compatible adaptor and the distance travelled is automatically logged every time you drive your car. At the end of your journey, swipe right on the app to record your journey as work-related. The app stores all the records for you, eliminating the need for manual logging. What is Work-Related Travel? Any trip you take in your car for work reasons is considered work-related travel, such as: visiting work sites attending client meetings travelling for work conferences attending to clients in their homes making deliveries or ferrying goods It is important to note that travelling to work and back from your residence is considered personal travel. Which Types of Vehicles are Covered? The ATO specifies that only vehicles designed to carry less than a tonne and fewer than nine passengers are permissible under this method. Motorcycles are excluded, as are larger vans and utes. What if I have More Than One Car? You can claim up to 5,000kms for each car you use for work-related purposes. What is Included in My Claim? You can only make a claim for business kilometres travelled. The set rate used to calculate the final figure considers all other vehicle expenses incurred (such as fuel, oil, servicing, insurance, registration, depreciation) and puts them together in one lump sum. Is the Cents per Km Method Right for Me? This process is a lot less time-consuming than the logbook method since logging of trips is minimal and there is no real need to keep documented proof of expenditure. If you find record-keeping tedious and don’t cover a lot of work trips in your car, this may be the best method for you as the amount you can claim back is capped at 5,000kms per annum. However, if you have high running costs and other significant vehicle expenses, you might be better off using a different system, such as the logbook method. How Do I Calculate the Cents per Km Method? The ATO website publishes an annual set rate, which increases yearly, so make sure you use the correct rate to avoid your claim being rejected. The current published rate for the period 2023 / 2024 is 85 cents per business Km. To work out how much to claim, multiply the total business kilometres travelled in a year by the current approved rate: TBK x CAR For example, let’s assume you travelled 5,900kms for work over the year. Remember, if your records show that you travelled 5,900kms for work, you can only claim 5,000kms. 5,000kms x 85 cents = $4,250 You can claim $4,250. The GOFAR app will automatically calculate your claim for you, so all you have to do is submit the final figure. What’s Next? Once you have submitted your tax claim, you can close off your financial year and begin logging new details for the following year.