Your Car Deduction Just Got Bigger: The Cents-Per-Km Rate Is Now 91c
The ATO's cents-per-kilometre rate jumped to 91c for 2026-27, up from 88c. Here's what it's worth, who can claim it, and the tax-time trap to avoid.
If you use your own car for work — driving between job sites, popping out to see clients, or running errands for the boss — the ATO just made that a little more valuable. From 1 July 2026, the cents-per-kilometre deduction rate rose from 88c to 91c per kilometre.
It's a small change on paper, but it lands right as tax time opens, which is exactly when it's easiest to mix up which year it applies to. Here's the plain-English version, including the trap most people fall into.
What actually changed
The cents-per-kilometre method is one of two ways individuals can claim car expenses for work-related driving — you multiply your work kilometres by a flat rate set by the ATO each year, and that's your deduction. No fuel receipts, no logbook of every expense, just the kilometres.
For the 2026-27 income year (1 July 2026 to 30 June 2027), that rate is 91 cents per kilometre — up 3c from the 88c rate that applied in 2025-26. It comes from a formal ATO determination (LI 2026/19), so it's locked in, not a proposal.
The rate is actually made up of two parts: an 89c base rate, plus a temporary 2c top-up for 2026-27 only, to reflect higher running costs like fuel. Because only the 89c base gets indexed each year, don't assume next year's rate will simply be 91c-plus-a-bit — it could land lower than 91c if the temporary top-up isn't repeated.
What it's actually worth
The method is capped at 5,000 work kilometres per car, per year — drive more than that for work and the extra kilometres don't add to this deduction (though the logbook method might get you more, see below).
At the cap, the maximum deduction rises from $4,400 (5,000km × 88c) in 2025-26 to $4,550 (5,000km × 91c) in 2026-27 — an extra $150 in deductions for anyone already maxing it out.
💡Worked example
Say you're a community support worker who drives 4,000km a year between client visits. Last year that was a $3,520 deduction (4,000 × 88c). This year it's $3,640 (4,000 × 91c) — $120 more taken off your taxable income. At a 30% marginal tax rate, that's about $36 more back at tax time; at 37%, about $44 more. A deduction lowers the income you're taxed on — it isn't a dollar-for-dollar refund.
The trap: which tax return does this apply to?
Tax time just opened, so it's tempting to plug 91c into the return you're about to lodge. Don't — the return you lodge from July 2026 covers the 2025-26 income year (1 July 2025 to 30 June 2026), and every kilometre you drove in that year is still claimed at the old 88c rate.
The 91c rate only applies to kilometres you drive from 1 July 2026 onwards — that's your 2026-27 income year, which you'll claim on the return you lodge from July 2027.
🚨Don't use 91c on this year's return
Lodging your 2025-26 return now? Use 88c per kilometre. The 91c rate is for kilometres driven from 1 July 2026, claimed on next year's return.
Who can actually use this method
It's open to employees and sole traders using their own car for work-related travel — think driving between two different workplaces, out to see clients, or between job sites. Ordinary travel from home to a fixed regular workplace still doesn't count, same as always.
You don't need a logbook or a shoebox of fuel and service receipts for this method — the flat rate is deemed to cover fuel, rego, insurance, servicing and depreciation all at once. You do still need to be able to show the ATO a reasonable basis for your kilometre estimate if asked, such as a diary of trips.
If your genuine work driving is well over 5,000km a year, it's worth comparing against the logbook method, which lets you claim the work-use percentage of your actual running costs — no cap on kilometres, but you do need a 12-week logbook and to keep every receipt.
FAQ
What is the cents-per-kilometre rate for 2026-27?
91 cents per kilometre, up from 88c in 2025-26. It applies to kilometres driven for work from 1 July 2026, capped at 5,000km per car per year for a maximum deduction of $4,550.
Do I need a logbook to claim the cents-per-kilometre rate?
No. This method doesn't require a logbook or expense receipts — you just need a reasonable way to show how you worked out your work-related kilometres if the ATO asks, like a diary of trips.
Can I use the 91c rate on the tax return I'm lodging right now?
No. The return you lodge from July 2026 covers the 2025-26 income year, where the rate is still 88c. The 91c rate applies to kilometres driven from 1 July 2026, claimed on the return you lodge from July 2027.
What if I drive more than 5,000km a year for work?
The cents-per-kilometre method caps out at 5,000km per car per year regardless of how much more you drive. If your work kilometres are consistently higher, the logbook method — claiming the work-use percentage of your actual car costs — may give you a larger deduction.
Run your own numbers