The cents per kilometre method is popular for car expenses because it's easy. But 'easy' doesn't mean 'anything goes' with the ATO. The ATO has noticed a few common misunderstandings that lead to incorrect claims. If you use this method, let's quickly check you're not making any of these common errors.

Myth 1: Driving to and from work counts

Travel between your home and your regular workplace is generally treated as private travel, so you can't claim it. Only work-related trips qualify. Examples include driving between work sites, visiting clients, or picking up supplies during the working day.

Myth 2: Everyone can claim 5,000 kilometres

The 5,000 km figure is a cap, not an automatic entitlement. You don't need a full logbook, but you do need to show how you worked out your business kilometres – like with diary entries, work rosters, or trip records. Without that, the ATO might reduce or disallow your claim.

Myth 3: You can claim a car under a novated lease

If your car is provided through a novated lease under a salary sacrifice arrangement, you can't claim car expenses for it using the cents per kilometre method. Those running costs are already covered through the lease arrangement.

Myth 4: You can claim depreciation on top

The cents per kilometre rate already covers all your car running costs: fuel, registration, insurance, servicing, and the car's decline in value. You can't claim depreciation or any other car expense separately on top of this.

Myth 5: You can mix methods within the same year

For any one car, you have to choose either the cents per kilometre method or the logbook method for the whole income year. You can't use one method for part of the year and the other for the rest.

Make record-keeping easier

Write down your trips in your diary or calendar. Alternatively, trips can be recorded using the myDeductions tool in the ATO app. The app offers three tracking options: point-to-point, GPS and odometer. Just a few seconds after each trip can save you a lot of stress at tax time.

Wondering which method is best for you? Choosing between cents per kilometre and logbook significantly impacts your deduction. If you drive a lot for work or have high running costs, the logbook method might give you a bigger claim. We can help you figure out the best approach for your business. Just reach out to the RGA team.

Need Help with your Business, Bookkeeping, Tax or SMSF requirements?

If you would like a little help, please get in touch with us for assistance. We can help with your business, bookkeeping, tax and SMSF requirements. To book an appointment, use our online booking system, give us a call on 07 3289 1700, or email us at reception@rgaaccounting.com.au.We look forward to assisting you this tax season!

Take this 25-question, 5-minute diagnostic to uncover your top 3 strengths and top 3 growth areas across 10 key scale-up factors — strategy, leadership, cash flow, and more. Click here. Get instant results. 

Please also note that many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances. Should you have any further questions, please get in touch with us for assistance with your SMSF, business, bookkeeping and tax requirements. All rights reserved. Brought to you by RGA Business and Tax Accountants. Liability Limited by a scheme approved under Professional Standards Legislation.