An electric car can cost considerably less to run than a petrol vehicle, yet the Australian Taxation Office allows exactly the same tax deduction for both when using the cents-per-kilometre method.
For the 2025–26 financial year, taxpayers can claim a tax deduction of 88 cents per eligible work-related kilometre, regardless of whether their vehicle runs on petrol, diesel or electricity.
The rate increases to 91 cents for the 2026–27 financial year.
The 88-cent advantage
Under the cents-per-kilometre method, taxpayers can claim a tax deduction for up to 5,000 eligible work-related kilometres per car annually, providing a maximum tax deduction of $4,400.
For example:
- 1,000 work kilometres provides an $880 tax deduction.
- 3,000 work kilometres provides a $2,640 tax deduction.
- 5,000 work kilometres provides a $4,400 tax deduction.
Importantly, these amounts reduce taxable income. They are not the amount taxpayers receive back as a tax refund.
The tax deduction is identical for electric and petrol vehicles, even though their running costs may be substantially different.
The rate covers all vehicle expenses, including fuel or electricity, insurance, registration, servicing and depreciation. These cannot be claimed separately when using this method.
Taxpayers must also demonstrate how they calculated their eligible work-related kilometres. Simply claiming the maximum without supporting information is not acceptable.
What about claiming actual expenses?
The alternative is the logbook method, which allows taxpayers to claim a tax deduction based on the work-related percentage of eligible vehicle costs.
These include:
- Petrol, diesel or electricity.
- Registration and insurance.
- Repairs, tyres and servicing.
- Interest on vehicle finance.
- Eligible lease payments.
- Depreciation, subject to applicable limits.
A valid logbook generally requires 12 continuous weeks of records and can remain valid for five years, provided circumstances have not materially changed.
For example, a vehicle with $10,000 in eligible annual expenses and 40% work-related use could produce a $4,000 tax deduction.
The same calculation applies to electric vehicles, although their operating expenses may be lower.
The electric vehicle difference
Electric vehicles introduce another consideration: how to calculate electricity expenses when charging at home.
For 2025–26, the ATO provides a simplified home-charging calculation of 4.20 cents per kilometre, subject to its conditions.
This is not an additional tax deduction under the general 88-cent method. It is a way of calculating electricity costs when using the logbook method.
For example, an electric vehicle travelling 15,000 kilometres annually, with 40% work-related use, could produce a home-charging electricity tax deduction of approximately $252.
Other eligible vehicle expenses can then be included using the same work-related percentage.
Specific rules apply where vehicles are also charged at commercial charging stations, and electricity expenses cannot be claimed twice.
Which kilometres can you claim?
Ordinary travel between home and a regular workplace is generally private. However, important exceptions exist.
Employees undertaking genuinely itinerant work, travelling between workplaces or attending alternative work locations may qualify for a tax deduction.
For example, a community support worker travelling between clients throughout the day may be entitled to claim a tax deduction for travel from home to the first client, between clients and from the final client home.
Similarly, tradespeople travelling between changing job sites may qualify, depending on their employment arrangements.
Simply working at different locations according to a roster does not automatically make home-to-work travel tax deductible.
Whether your vehicle is electric or petrol-powered, the same rules determine which journeys qualify for a tax deduction.
Which method is better?
For taxpayers travelling relatively modest distances for work, the cents-per-kilometre method may be particularly attractive, especially for electric vehicles with lower running costs.
For others, substantial finance costs, depreciation or extensive work-related travel may make the logbook method more beneficial.
The difference can be significant, and the method producing the largest tax deduction is not necessarily the one taxpayers expect.
Be sure to keep your vehicle records, understand which journeys qualify and compare both methods before lodging your tax return.
The important distinction is not whether your car runs on petrol or electricity.
It is understanding that the cost of driving and the tax deduction for driving are not necessarily the same thing.