ATO cents per km rate 2025-26

The ATO has confirmed that the cents per kilometre rate for the 2025/2026 tax year is 88 cents per kilometre, effective from 1 July 2025 to 30 June 2026. The rate remains unchanged from the previous year.  

No changes to the cents per km rate for 2025-26 

The ATO reviews the rate annually, taking into account vehicle running costs (fuel, depreciation, maintenance, insurance) and other economic factors such as inflation. 

For the upcoming tax year, the rate will be held at 88 cents per kilometre. 

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How the rate applies based on your employment type 

For sole traders and partnerships 

• You can use the ATO cents per km rate to claim a deduction for up to 5,000 business kilometres driven in the 2025/26 income year. 
• You cannot claim any other car expenses separately, as the rate covers all running costs, including vehicle depreciation.

Also read: ATO Car Expense Deduction Rules for the Self-Employed 

For employees 

• If your employer reimburses you, they may use the ATO rate or set a different rate. It’s the employer’s choice to reimburse you, and they can also do so at a rate higher or lower than the 2025 cents per km rate. 
• If you don’t get reimbursed for your business driving, you can claim up to 5,000 km at 88 cents per km on your tax return.

For more rules on employee car expenses, read our dedicated employee guide. 

Recordkeeping 

No written evidence of each trip is required with the cents per kilometre method, but the ATO may ask for proof of how you worked out all your private vs business driving to validate your claim. 

We advise keeping a paper diary or a vehicle logbook app to be on the safe side. 

If you drive more than 5,000 business km a year 

If your business driving exceeds 5,000 kilometres a year, you cannot apply the cents per kilometre method. You might want to consider the ATO’s logbook method for claiming vehicle expenses. 

With the logbook method, you can claim actual vehicle expenses instead of applying the set rate, without a km limit. 

Our side-by-side comparison of the cents per km method vs the logbook method might come in handy when deciding what’s best in your unique situation. 

FAQ