Taxes and cars: Part 1 – Deductions without receipts
As a taxpayer in Perth, one of the simplest ways to reduce your taxable income is by claiming tax deductions for motor vehicle expenses related to work travel. The Australian Taxation Office (ATO) allows taxpayers to claim a deduction based on a set rate per kilometre for work-related vehicle use. For the 2026 financial year, the ATO’s set rate has increased to 88 cents per kilometre, providing even more significant savings for eligible taxpayers.
However, while the set rate method is straightforward, it’s crucial to understand the substantiation requirements, ensure the correct distinction between work-related and personal travel, and maintain accurate records to back up your claim.
What is the Set Rate Per Kilometre?
For the 2026 tax year, the ATO allows taxpayers to claim 88 cents per kilometre for work-related vehicle travel. This simplified method is typically used by those who travel less than 5,000 kilometres annually for work purposes. If you exceed that threshold, the logbook method may be better rather than using a set rate.
If you are travelling more than 5,000 kilometres, you can still claim the set rate per kilometre method. It is just that your claim is capped at 5,000 kilometres.
Substantiation Requirements for Vehicle Claims
The ATO does not require receipts under the set rate method; however, you still need accurate records to substantiate your claim. To claim the deduction, you must:
- Keep Travel Evidence: While receipts and a logbook are not needed, you must be able to demonstrate the kilometres travelled for work. You are not required to prepare a logbook as evidence, but you do need a detailed and reasonable estimate as to how you have constructed your claim. This can be done by maintaining a travel diary that records key details like the number of kilometres travelled, the date, purpose and destination of the trip.
You do not need to detail each trip to the extent detailed above. If you make a regular trip (say, Perth to Rockingham and back four times a week to meet client X), then that is sufficient to make a detailed and reasonable estimate of your travel claim.
- Work-Related Travel Only: Only kilometres driven for work-related purposes are eligible for a claim. If the journey is personal or for commuting between home and your regular place of work (unless you’re in an occupation like a travelling salesperson), those kilometres are not deductible.
- Ownership: You must either own the car or use it under a finance arrangement. If the car belongs to someone else, such as your Nanna, you cannot claim a cost for the use of the car. The wear and tear on the car belongs to your Nanna, and not you.
What Qualifies as Work-Related Travel?
Work-related travel refers to any travel directly related to your job. Here’s a list of examples:
- Visiting clients or customers: Travel to meet clients or customers, whether on-site or in their offices.
- Travel between workplaces: If your job requires you to work across multiple locations (e.g., multiple job sites, offices), these trips are deductible.
- Business errands: If you need to collect or deliver materials for your job, these trips are also considered work-related.
- Travel to tax advisors: If you drive to meet your tax advisor, the travel to the tax advisor will qualify as a tax-deductible travel item.
What Doesn’t Qualify as Work-Related Travel?
Not all travel is deductible, even if it appears to be work-related. Some examples of non-deductible travel include:
- Commuting: Travel between your home and regular workplace is generally not deductible, unless you’re in a role like a salesperson, where you’re regularly required to work at different locations.
- Personal trips: Any travel not directly related to your job, such as a weekend getaway or personal errands, cannot be claimed.
- Rental property: Driving to inspect, manage or repair a rental property is not tax deductible, even if you manage it. If you are a real estate agent managing other people’s properties you can, but if the property is your own, you cannot.
- Travel for unpaid work: If you are working in a volunteer capacity, or if you are a student, you cannot claim the travel costs as a tax deduction. Your work-related travel must be directly related to work that generates taxable income at the present time.
- Travel paid by your work: If your boss pays for the cost of the car, and they claimed it as a tax deduction, you cannot claim it again.
The following example illustrates how different taxpayers can claim different travel expenses:
Claiming Travel for an Electric Car (4,000 km):
Let’s assume a taxpayer (Mick) in South Perth uses an electric car for work-related travel. Over the year, Mick drove a total of 4,000 km for job-related purposes.
With the 2026 rate of 88 cents per kilometre. Mick would calculate their deduction as follows: 4,000 km x $0.88 = $3,520 deduction. To substantiate this, Mick must maintain a detailed estimate of the trips, showing dates, destinations, and the work-related purpose of each journey. If Mick fails to provide proper records, the ATO may disallow the claim.
Conclusion
Claiming motor vehicle expenses at a set rate per kilometre is a simple way for Perth taxpayers to reduce their taxable income. The 2026 rate of 88 cents per kilometre increases the potential deduction, providing more financial relief for taxpayers using their vehicles for work-related travel.
To maximise your claim and avoid penalties, it’s vital to:
- Keep accurate records of your travel
- Ensure your trips are work-related
- Understand that commuting and personal trips are not deductible
If you’re uncertain about the eligibility of your trips or need assistance in calculating your deductions, consulting with a tax advisor—especially one with expertise in corporate tax matters—can ensure you remain compliant and claim the maximum allowable deduction.