Vehicle expenses for contractors: what to record and how to keep your logbook tax-ready
Updated: 1 day ago
Guest post by Ashlinn Leatham, CMO and co-founder of CarSavvy. Every rate and rule below has been checked against the ATO by the TechEdge team.
For most contractors, the vehicle is the second most important tool after your hands. Your ute, van or car gets you to site, carries your gear and takes you to the supplier three times a week.
It can also be one of your biggest tax deductions. But only if your records back it up. Every tax time, accountants see the same problem: a genuine business claim that's hard to prove because the records were pieced together from memory in July.
This guide is for sole traders and small project businesses in construction, trades and solar. It covers which trips count, how the cents per km and logbook methods work, what to keep, and the mistakes that cost contractors money.
Start with two questions: what vehicle, and what structure?
Before you pick a method, check two things. The answers decide which methods you can use at all.
1. Is it a "car" for tax purposes? The ATO treats some work vehicles as not cars. That includes vehicles with a carrying capacity of one tonne or more (such as trucks and some utes) and vehicles that seat nine or more people, including the driver (ATO: vehicles that aren't cars). Check your ute's carrying capacity on the manufacturer's specs rather than guessing.
2. How is your business set up?
Sole traders and partnerships (with at least one individual partner) can use cents per km or the logbook method for cars. For vehicles that aren't cars, they must use actual costs.
Companies and trusts must use the actual costs method for every vehicle.
Which trips count as business travel?
This is where most claims go wrong. The ATO says travel between your home and your place of business is generally private use (ATO: deductions for motor vehicle expenses).
If you run a home-based business, trips from home for business purposes can be claimed. The ATO's examples include going to a client's premises, buying equipment or supplies, and visiting your tax agent (ATO: home-based business vehicles).
For a typical contractor, trips that usually count include:
Driving between job sites during the day
Picking up materials from the supplier or hardware
Quoting and site inspections
Dropping off or collecting hire equipment
Driving to your accountant or the bank for business
Whether your first and last trip of the day counts depends on where your business is based. That's worth confirming with your accountant before you start your logbook, not after.
Cents per km or logbook: which method suits you?
The cents per km method multiplies your business kilometres by a set rate. For the 2026-27 income year (from 1 July 2026), the rate is 91 cents per km (LI 2026/19). You can claim up to 5,000 business km per car, per year, so the maximum claim is $4,550 (ATO: cents per kilometre method).
Still lodging a 2025-26 return? The rate for that year is 88 cents per km, so the maximum claim is $4,400.
The rate covers all your running costs, including fuel, servicing, rego, insurance and depreciation. You can't claim those separately on top. You don't need written evidence of every kilometre, but the ATO may ask how you worked out your business km, so a diary of trips is still smart.
The logbook method claims the business-use percentage of your actual car costs. You keep a logbook for at least 12 continuous weeks that represents your normal travel. That percentage is then applied to all your car expenses for the year (ATO: logbook method).
The ATO's own example: 6,600 business km out of 11,000 total km is 60% business use. With $9,000 in car expenses, the claim is $5,400.
The two methods at a glance (2026-27)
Who can use them: both are for sole traders and partnerships, and for cars only.
How the claim works: cents per km is business km × 91c. Logbook is business-use % × actual costs.
Cap: cents per km stops at 5,000 km ($4,550). The logbook method has no km cap.
Evidence: cents per km needs no running cost receipts, but keep a trip diary. The logbook method needs a 12-week logbook (valid for five years) plus evidence of your car expenses.
Usually suits: cents per km for lower business km. Logbook for heavy business use and higher running costs.
If you drive a lot for work, the logbook method often gives a bigger claim. You can use a different method for each car, and switch methods from year to year. Running the numbers both ways at tax time is worth five minutes.
What your logbook must include
The ATO is specific about what a valid logbook contains. For the logbook period, record:
The start and end dates of the logbook period
Odometer readings at the start and end of the period, and total km travelled
Your business-use percentage for the period
The car's make, model, engine capacity and rego number
For each business trip, record:
The start and end date
Start and end odometer readings
Kilometres travelled
The reason for the trip (for example, "Site visit: solar install, 14 Smith St, Penrith")
Consecutive trips on the same day can be recorded as one journey. So a day running between three sites and the supplier doesn't need four separate entries.
A logbook is valid for five years. But you still need odometer readings at the start and end of each later year it covers. If you run two or more cars, their logbooks must cover the same period.
Keeping receipts that hold up
If you use the logbook or actual costs method, you need evidence of your car expenses. The ATO lists receipts for fuel, oil, repairs, servicing and insurance, plus loan or lease documents, tax invoices and rego papers. Keep these records for five years (ATO: motor vehicle records you need to keep).
For fuel and oil, the ATO lets you use either actual costs or an estimate based on odometer readings. Everything else needs proper evidence.
Practical habits that help:
Photograph fuel and parts receipts on the day. Thermal paper fades, and dockets end up on the dash or in the bin.
Ask for tax invoices on bigger costs. If you're registered for GST, you'll generally need one to claim the GST credit on tyres, servicing and accessories.
Keep business and personal spending separate. A business card for fuel and vehicle costs makes reconciling much easier.
Record the reason while you still remember it. "Bunnings" means little in June. "Bunnings: conduit for Parramatta job" does.
This is where a logbook app earns its keep. Paper logbooks rely on you writing down odometer readings at every stop, which rarely happens on a busy site day. An app that records trips automatically captures the dates, distances and start and end points as you drive, so all you add is the reason.
Many contractors now use tools like CarSavvy to keep trips and receipts in one place, then export a summary for their accountant at tax time. Whatever you use, make sure it captures every detail the ATO lists above.
Seven common tax-time mistakes
Treating every trip as business travel. Home to your regular workplace is generally private. Claiming 100% business use on a vehicle that also does the school run or weekend trips is a red flag.
Keeping the logbook in a quiet patch. Your 12 weeks must represent your travel across the year. If you log during a busy install season and then have a slow winter, your percentage won't hold up. Tracking trips year-round makes it easier to check that your 12 weeks are a fair picture.
Forgetting the yearly odometer readings. A five-year logbook only works if you record the odometer at the start and end of each later year. Set a reminder for 1 July and 30 June.
Using the wrong method for the vehicle. A one-tonne-plus ute isn't a car, so cents per km and the logbook method don't apply. The same goes for any vehicle owned by a company or trust.
Double-dipping on cents per km. If you claim 91c per km, you can't also claim fuel, rego or servicing for that car.
Rebuilding the year from memory. Reconstructing trips from calendars and bank statements in July is slow, stressful and hard to defend if the ATO asks questions. Records made at the time of the trip, whether on paper or captured automatically by an app, are far stronger.
Letting the logbook lapse. Each logbook lasts five years, after which you need a new one. If you change vehicles or your work pattern shifts a lot, starting a fresh logbook keeps your percentage accurate.
A simple routine that keeps you tax-ready
Good records come from small habits, not a big clean-up in June.
Daily: Log each business trip and its purpose, and snap any receipts. A logbook app can record the trip for you, leaving just the purpose to add.
Weekly: Check nothing's missing while the week is still fresh.
Monthly: Match fuel and vehicle costs to your bank or card statement.
30 June and 1 July: Record your odometer reading for every vehicle.
At tax time: Send your accountant the logbook summary, expense records and odometer readings together.
The bottom line
Your vehicle is a legitimate business cost, and a well-kept logbook is what turns it into a deduction you can stand behind. Know which method your vehicle and structure allow, record trips as they happen, and keep every receipt for five years.
For more on what makes a vehicle claim hold up, including the FBT rules for dual cab utes, read CarSavvy's companion article with insights from Rami Rajkumar CPA of TechEdge Accounting: ATO car expense audit: how to make your claim hold up.
Not sure which method gives you the better result, or whether your trips from home count? Book a free 30-minute call with a CPA, call +61 468 634 973 or email info@techedgeaccounting.com.au.
This article is general information only and doesn't consider your personal circumstances. Speak to a registered tax agent about your situation. Rates and rules current as of October 2026.
About the author
Ashlinn Leatham is the CMO and co-founder of CarSavvy, an Australian app that helps sole traders and small businesses log work trips and vehicle expenses without the end-of-year scramble.
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