Millions of Aussies who use their car for work will be able to claim an increased $4,400 deduction on their tax returns this year. The Australian Taxation Office (ATO) bumped up the amount taxpayers can claim without a logbook, but one tax expert has argued it’s not enough.

If you use your car for work, you can claim a deduction using the “cents per kilometre method” or the more onerous “logbook method”. For the 2024-25 year, the ATO has increased the cents per kilometre set rate to 88 cents per kilometre, up from 85 cents.

Tax Invest Accounting director Belinda Raso told Yahoo Finance she was disappointed by the small increase, considering the high cost of living and cost of fuel.

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“Three cents really doesn’t cut it. So it’s quite disappointing. We would have expected at least six or seven cents again [as in previous years],” she said.

The change means taxpayers will be able to claim an extra $150 deduction over the whole year, compared to last financial year.

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An ATO spokesperson told Yahoo Finance the rate was determined each year by application of the Private Motoring Subgroup Index.

"The rate is also indexed each year to reflect movement in the Consumer Price Index," the spokesperson said.

Raso said Aussies should use the change as motivation to claim the maximum amount they could, which may mean using the logbook method rather than the cents per kilometre method.

How do I claim work-related car expenses?

The cents per kilometre method lets you claim up to 5,000 work-related kilometres. This covers all car expenses, including the vehicle’s decline in value, registration, insurance, maintenance, repairs and fuel costs.

At 88 cents per kilometre, that works out to a maximum deduction of $4,400 through this method.

Raso said taxpayers need to be careful to not just automatically claim 5,000 kilometres, as this may trigger an audit from the ATO.

"If you're pulled up for an audit, you do need to substantiate where you've gone, how often you've gone, how far you've gone and why you've gone there," she said.

The logbook method allows you to claim more than 5,000 kilometres but you’ll need to keep a log book for 12 weeks to work out the percentage you can claim.

“That logbook needs to identify all of the vehicle usage, so business and personal usage, for 12 weeks straight,” Raso explained.