ATO Km Rate 2026–27: Why It Is 91 Cents, Why the Return You Lodge This Spring Still Says 88, and Why Next Year Starts From 89

On 10 September 2026 I pulled the Google Australia results for ato km rate, ato mileage rate, ato cents per km 2026, cents per km 2025 and ato km allowance, took the twenty-six ranking pages that are not published by the ATO itself, and read them. Eleven of the twenty-six give the new rate of 91 cents. Twenty-one of the twenty-six still give 88. Four of them still say the maximum claim is $4,400.

That is not as careless as it looks, because for most people reading this in September or October, 88 is the right number. The return you are lodging now is for the year that ended on 30 June 2026, and the rate for that year is 88 cents. Three of the twenty-six pages say so in as many words.

The ATO km rate is not one number. It is a mechanism with three moving parts: the income year it belongs to, the formula that produced it, and the legislative instrument that carries it. Once you can see the three parts, the number stops being confusing — and you can see what it will probably do next July, which no page on the first two results pages tells you.

I build Magica, a logbook and kilometre tracker, so I have a side in this. That is also why every figure below is quoted from the Income Tax Assessment Act 1997, from the determination and its explanatory statement, or from an ATO page, with a link on each so you can check it yourself.

The number on the return you are lodging now is 88, not 91

The ATO’s own cents per kilometre method page, last updated 12 August 2026, puts the rule in one line: “Use the rate for the income year for which you are claiming a deduction.” Then it lists them:

Income year	Rate	The return it goes on
2026–27	91 cents	lodged from July 2027
2025–26	88 cents	lodged now, July to October 2026
2024–25	88 cents	lodged in 2025
2023–24	85 cents	lodged in 2024
2022–23	78 cents	lodged in 2023
2020–21 and 2021–22	72 cents	lodged in 2021 and 2022

The instructions for the return people are filling in this spring, D1 Work-related car expenses 2026, do not mention 91 cents at all. They say: “Claim a rate of 88c per kilometre for 2025–26 up to a maximum of 5,000 work-related kilometres”, and the worked example is “3,250 kms × $0.88 = $2,860”. myTax 2026 says the same: “88c per kilometre for all cars”.

Even the ATO’s work-related car expenses calculator, updated on 1 July 2026, the day the new rate started, carries this note: “Use this calculator for the 2013–14 to 2025–26 income years.” It cannot compute a 2026–27 claim yet, because nobody can lodge one until July 2027. None of the fourteen pages that point you to the calculator mention that.

So the trap in the search term is the year. “Cents per km 2025” happens to be safe, because 2024–25 and 2025–26 carry the same 88 cents. “ATO cents per km 2026” has two correct answers, and which one you need depends on whether you are lodging or driving.

91 is two numbers: 89 plus 2

The rate lives in the Income Tax Assessment (Cents per Kilometre Deduction Rate for Car Expenses) Determination 2026, F2026L00785, dated 22 June 2026 and registered the day after. Section 6 is the whole of it: “the rate of cents per kilometre for cars for the income year commencing on 1 July 2026 is 91 cents per kilometre.”

The interesting document is the explanatory statement registered with it, and five of the twenty-six pages — two of them newspapers — have read it far enough to report its second paragraph:

This figure is the base cents per kilometre rate of 89 cents with a temporary one-off uplift of 2 cents per kilometre for the 2026-27 income year.

The 2 cents is there because of petrol. The statement says the uplift accounts for “expected higher than average operating costs in the 2026–27 income year, relating to global conditions affecting fuel prices during the March quarter for 2026 and price uncertainty in the period ahead”, and explains why the ordinary formula could not catch it: “The impact on operating costs did not occur until late into the fourth quarter.” The Commissioner used a discretion because of “both the sharp nature and the timing (late in the fourth quarter) of the fuel price shock, which combined means the base rate does not reflect current operating costs for cars.”

Two numbers do the work, and no ranking page prints either of them. The base indexation factor, the average of the four most recent quarters over the four before, is 1.009: “After applying the indexation factor (1.009) to the published cents per kilometre rate for the 2025–26 income year of 88 cents per kilometre, the result is a base rate of 89 cents per kilometre.” The uplift factor, March 2026 against March 2025 alone, is 1.033, and 88 × 1.033 rounds to 91.

One more line from the same document, which nobody quoted: consultation on the draft ran for two weeks, from 27 May to 12 June 2026, and “No comments were received as a result of consultation.”

Where the 89 comes from: a CPI series with a name

Section 28-25(5) of the Act says the Commissioner “must have regard to the average operating costs for the cars to be covered by that rate”. The explanatory statement says how: “the Commissioner updates the rate in accordance with the annual movement of the Private Motoring Subgroup, within the Transport Group, of the consumer price index (CPI).” It even gives the series — ABS Table 18, “Index Numbers; Private motoring; Australia (series ID A2326656J)”.

Two pages out of twenty-six name the private motoring subgroup, and both are newspaper reports of the June announcement. It matters for a practical reason: you can read the number before the ATO does. The March-quarter CPI lands in late April, the determination is made in June, and the base for next year is whatever that series did across the year.

Why the rate has to track the average car — and what that means for whether your car is above or below it — is a separate piece of arithmetic. I worked it through in logbook method vs cents per km: the two methods pay the same when your car costs exactly the rate to run, which is by construction the average car.

Next year starts from 89, and the floor is 89

This is the part that changes what you should expect next July, and none of the twenty-six pages say it.

The statement is explicit that the 91 is temporary: “The rate of 91 cents per kilometre will be in effect for the 2026–27 income year only.” And it is explicit about the base for the next determination: “For future income years, the calculated annual indexation rate will be applied to the 2026–27 base cents per kilometre rate of 89 cents.” Then, in the section on effect: “For subsequent income years, the rate of 89 cents per kilometre or above will be set at the Commissioner’s discretion based on available CPI data at the time of review.”

Read the two sentences together. The floor for 2027–28 is 89, not 91. If private motoring costs are flat across the year, the rate can go down, from 91 to 89, and the statement leaves room for exactly that.

That would be a first. The ATO’s own register of rate determinations lists six of them — 2018, 2020, 2022, 2023, 2024 and 2026 — and every one moved the rate up: 68, 72, 78, 85, 88, 91. The one before the list is in the Act itself, a transitional provision fixing “the rate of 66 cents per kilometre for all cars for the 2015-16 income year”. A 2027 determination that reads 89 would be the first to send the number backwards.

It is worth knowing now, because a fall in the rate is not a fall in your deduction if you keep a logbook. It is only a fall if your entire claim is kilometres multiplied by a number somebody else sets.

Why the rate did not move last year

Eleven of the twenty-six pages list 88 cents for both 2024–25 and 2025–26. Two explain why.

The 2024 determination was written to last: it applied “for the 2024–25 income year and remain effective for the 2025–26 income year”, and, in the ATO’s standard line, “This rate will apply until a new determination is made.” The explanatory statement for the 2026 instrument confirms it: the 2024 rate “applied to income years commencing from 1 July 2024 (until the 2024 instrument’s repeal)”. No determination was made in June 2025, so nothing changed.

That is how the earlier gaps happened too. The 2020 instrument set 72 cents “for the income year commencing 1 July 2020” and the ATO announced, in the same breath, that “For the 2021-22 income year there will no changes”. Six determinations across nine income years: a year in which the rate stayed put is a year in which nobody signed a new one.

The 2026 instrument is different in one detail. Its section 6 names a single income year, and the statement says “only”. The developer page still carries the boilerplate “This rate will apply until a new determination is made”, but the document underneath it is written for one year, with a promise of a rate of 89 or above for the years after. Expect a 2027 determination in June, not silence.

What the rate is, and what it is not

The rate is a substitute for every car expense at once. The ATO: “The rate per km covers all of your car expenses including decline in value, registration and insurance, maintenance, repairs and fuel costs. You can’t add these, or any other car expenses, on top of the rate when calculating your deduction.” That includes the decline in value of the car itself, which is why a new or expensive car usually does better under the logbook — I went through the arithmetic in the comparison piece above.

It is capped at 5,000 work-related kilometres per car, and the cap belongs to the car and the owner together: “If you and another joint owner use the car for separate income-producing purposes, you can each claim up to 5,000 work-related kilometres.” At 91 cents that is $4,550 per person for 2026–27, up from $4,400 at 88 cents — the $150 that made the newspaper headlines in June.

It needs no receipts, but it does need a record of the kilometres, and the ATO’s own example shows what that record looks like. Johan drives a 27-kilometre round trip to clients once a week and a 106-kilometre round trip once a month. His diary at the end of 2025–26 says 46 weekly trips and 12 monthly ones: 46 × 27 = 1,242 km, 12 × 106 = 1,272 km, 2,514 km in total, and “2,514 km × 0.88 = $2,212”. Note the year: the example is for the return being lodged now, at 88 cents, and none of the ranking pages reproduce it.

What the rate is not is a licence to skip the question of which trips count. The 5,000 kilometres have to be work-related in the ATO’s sense, and the commute is not — that is decided by a 1958 High Court case, and it is the whole subject of another piece. If you go the other way and keep a logbook, the records the Act demands are in ATO logbook requirements.

The same rate has three other jobs, and one of them is not this rate at all

The 91 cents is the deduction rate. The same number turns up in three other places in the tax system, and the ranking pages mention almost none of them.

Your employer’s payroll. If you are paid a kilometre allowance, the ATO’s withholding for allowances table, updated 26 August 2026, uses the deduction rate as the line. Payments “by applying the approved (or a lower) rate to the number of kilometres travelled up to 5,000 business kilometres” — no withholding. Kilometres “in excess of 5,000 business kilometres” — withholding on the excess. A rate “above the approved rate” — withholding on the part above it. Nine of the twenty-six pages mention car allowances; none of them mention this table.

The allowance is still assessable income, it appears on your income statement under the Single Touch Payroll code “Cents per kilometre (km) allowance (allowance type CD)”, and you claim the deduction separately. The ATO’s payroll example is Harry, whose award pays “88 cents per kilometre”: his employee drives 37 kilometres to fetch and return a trailer, is paid “$32.56”, and the ATO explains why that is an allowance and not a reimbursement: “It’s not a reimbursement because it is an estimate of an expense.” That distinction — allowance, reimbursement, deduction — is a subject of its own and I will come back to it.

Fringe benefits tax, where the engine-size rate still lives. If someone tells you the ATO rate depends on engine capacity, they are not entirely wrong; they are describing a different rate. TD 2026/1, dated 25 March 2026, sets the cents per kilometre rates an employer uses to value the private use of “a motor vehicle other than a car” — a one-tonne ute, a van, a motorbike — for the FBT year from 1 April 2026: “0–2500 cc 70c Over 2500 cc 82c Motorcycles 20c”. The deduction rate stopped depending on engine size in 2015–16; the FBT one never did. Two of the twenty-six pages mention it.

GST, where the set rates disappeared. Sole traders registered for GST used to have a bulletin with set percentages for claiming input tax credits under the cents per kilometre method. That bulletin, GSTB 2006/1, was withdrawn on 22 January 2020 with the words “Consequently, a replacement ruling will not be issued”, and the ATO now points to GSTR 2006/4 on the extent of creditable purpose. If a page gives you a neat GST percentage table for the cents per kilometre method, it is quoting a document that no longer exists.

And a fourth number that is also “cents per kilometre” and also changed: the home-charging rate for electric vehicles under the logbook method is 5.47 cents from the year starting 1 July 2026, up from 4.20. It is not this rate — it is a component of actual costs — but it is the one most likely to be quoted at the old figure.

What to do when the rate changes at 1 July

The practical rule is that your records never contain a rate. They contain dates and kilometres. The rate is applied once, at the end, to the total for each income year, and a rate change on 1 July costs you nothing if the trip on 29 June and the trip on 2 July are both in the diary with their dates on.

Three things follow from that.

1. Keep the year boundary visible. If you were tracking through June 2026, the kilometres up to 30 June go at 88 and the ones from 1 July go at 91. The ATO’s example above does this without comment: it is a 2025–26 claim at the 2025–26 rate.
2. Do not pre-apply a rate. A spreadsheet that stores “$0.88 × km” per row has to be rebuilt every July, and it will silently carry the wrong rate into the new year. Store the kilometres and multiply at lodgement.
3. If you are paid an allowance, check what rate your employer is using. Harry’s award pays 88 cents. From 1 July 2026 the approved rate is 91, so an employer still paying 88 is paying “a lower rate”, which is fine for withholding — and you still claim your deduction at 91 on the kilometres, not at what you were paid.

Watch the March-quarter CPI next April. If private motoring is flat, plan for 89, not 91.

Where Magica fits, and where it does not

Magica is the app I build, and it does the part of this that survives a rate change: it records the trips. It logs them automatically by Bluetooth or motion, keeps the date and the kilometres on each one, classifies them as work or private, and exports the year’s kilometres as a PDF or CSV you can hand to your accountant with the split at 30 June already visible. The data stays on the phone — there is no server of mine holding it, because there is no server of mine. That is an architecture decision, not a marketing promise. If you are comparing it with the ATO’s free myDeductions tool and the other apps in the category, that comparison is in ATO logbook app.

What it does not do is choose the rate for you. The rate is a number that comes out of a legislative instrument each June, and the multiplication is the smallest part of the job; the kilometres are the part nobody can reconstruct in October.

What no rate can tell you

Three questions decide the size of the claim before the rate touches it.

Which income year do the kilometres belong to? The rate follows the year of the driving, not the year of the lodging. This spring that is 88 cents.

Were the trips work-related in the ATO’s sense? The rate does not make a commute deductible. That test is older than the rate and stricter.

Is 5,000 kilometres at the rate more than your car actually cost to run? If your car is cheap and old, the rate flatters you. If it is new, the logbook probably wins, and a 2-cent uplift does not change that.

The figures here are the ones the ATO, the Act and the determination publish, and they are general. Your circumstances are not, so check them with your tax agent before you lodge — particularly if the year you are claiming for is not the year everyone is writing about.

Frequently asked questions

What is the ATO km rate for 2026–27?

91 cents per kilometre, for the income year that started on 1 July 2026, set by the Income Tax Assessment (Cents per Kilometre Deduction Rate for Car Expenses) Determination 2026 (F2026L00785). The rate is capped at 5,000 work-related kilometres per car per year, so the maximum claim is $4,550.

Which rate do I use on the tax return I am lodging in 2026?

88 cents. The return lodged between July and October 2026 covers the 2025–26 income year, and the ATO’s instructions for that return say “Claim a rate of 88c per kilometre for 2025–26”. The 91-cent rate applies to kilometres driven from 1 July 2026 and goes on the return you lodge in 2027.

Why is the 2026–27 rate 91 cents and not 89?

Because it is two numbers. The explanatory statement to the determination describes 91 as “the base cents per kilometre rate of 89 cents with a temporary one-off uplift of 2 cents per kilometre for the 2026-27 income year”. The 89 comes from indexing 88 cents by 1.009, the annual movement of the private motoring subgroup of the CPI; the 2 cents is a discretionary uplift for the fuel price shock in the March quarter of 2026.

Will the ATO km rate go down next year?

It can. The statement says the 91 cents “will be in effect for the 2026–27 income year only” and that for later years “the rate of 89 cents per kilometre or above will be set at the Commissioner’s discretion”. Indexation is applied to the 89-cent base, not to 91, so if private motoring costs are flat the rate could return to 89. It has never fallen before: every determination since 2018 has raised it.

Why was the rate 88 cents for two years in a row?

Because no new determination was made in 2025. The 2024 determination applied “for the 2024–25 income year and remain effective for the 2025–26 income year”, and the ATO’s rule is that a rate applies until a new determination is made. The same thing happened in 2021–22, which kept the 2020 rate of 72 cents.

Does my employer have to pay the ATO rate?

No. An employer can pay any kilometre allowance the award or contract provides. The ATO rate matters for withholding: an allowance at the approved rate or lower, for up to 5,000 business kilometres, has no tax withheld from it, while anything above the rate or beyond 5,000 kilometres does. The allowance is assessable income either way, and you claim your own deduction at the ATO rate on the work-related kilometres.

Is there an ATO cents per kilometre rate for utes, vans and motorbikes?

Not for income tax deductions: vehicles that are not cars cannot use the cents per kilometre method or the logbook method, and you claim actual costs instead. There is an engine-capacity rate for those vehicles under fringe benefits tax, in TD 2026/1: 70 cents up to 2500 cc, 82 cents over 2500 cc and 20 cents for motorcycles, for the FBT year from 1 April 2026.

Does the cents per kilometre rate include fuel?

Yes. The ATO says the rate “covers all of your car expenses including decline in value, registration and insurance, maintenance, repairs and fuel costs”, and you cannot claim any of them on top. Fuel is claimed as an actual cost only under the logbook method.