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The ATO 4.2c/km EV charging shortcut — how it actually works

EV charging sounds simple until you try to claim it.

Different electricity tariffs, solar vs grid, time-of-use pricing, free public chargers, workplace chargers, battery losses… it quickly becomes a record-keeping nightmare.

Recognising this, the ATO essentially said: this is getting ridiculous.

So instead of forcing everyone to track the cost of every kWh, they introduced a simplified shortcut method.

What is the 4.2c/km shortcut?

Under PCG 2024/2, the ATO allows EV owners to claim home charging costs at a flat rate of:

4.2 cents per kilometre driven

This applies to home charging, and it is:

  • based purely on odometer readings
  • completely independent of
    • your electricity tariff,
    • when you charge,
    • how much solar you use,
    • how much free charging you get elsewhere.

In other words:

When it comes to claiming home-charging expense, the ATO does not care how you actually charged the car. They only care how far you drove it.

This makes the method simple, cheap to comply with, and very predictable.

Important: this is not a cash reimbursement

A very common misunderstanding is this:

“If I claim 10,000 km, I get $420 back.”

That is not how it works.

The 4.2c/km amount behaves like a tax deduction, not a refund.

Example

If you drive 10,000 km in a year:

  • Claim amount:
    10,000 × $0.042 = $420

That $420 is added to your deductions.

Your actual benefit depends on your marginal tax rate.

For someone on 30% tax + 2% Medicare levy:

  • Net benefit = $420 × 32% = $134.40

So you are not being paid $420; you are reducing your tax bill by $134.40

The counter-intuitive bit: you can "make money from charging-and-driving"

Because the claim is distance-based, not cost-based, something interesting can happen.

If you charge your EV very cheaply — for example:

  • heavy solar usage,
  • very cheap off-peak tariffs (e.g. 8c/kWh),
  • or a mix of free charging

then the actual electricity cost of driving those kilometres can be lower than the tax benefit you receive from the 4.2c/km deduction.

In that situation, the net effect is that:

you make net profit from charging your EV.

This feels wrong intuitively, but it is simply a consequence of the shortcut being deliberately conservative and administratively simple.

Example

If you drive 15,000 km in a year and are on top marginal tax bracket (45+2%):

  • Claim amount:
    15,000 × $0.042 = $630

Your car has an average efficiency of 150Wh/km, and you charge your car on a cheap tariff of 8c/kWh.

  • Actual electricity expense: 15,000 x 0.15 x $0.08 = $180

When you claim the $630,

  • Tax refund = $630 × 47% = $296.10

Once you reconcile with your actual expense, post-claiming you have made $116.10 profit from charging the car.

The three ways you can claim EV charging

If you read PCG 2024/2 carefully, there are three permissible approaches.

1. Use 4.2c/km for distance driven

This is the simplest and most common method.

As discussed above, you:

  • record odometer readings,
  • calculate the distance driven,
  • claim 4.2c/km for that distance.

If you choose this approach, you can't claim any commercial charger cost that you have incurred.

2. Claim only commercial charging invoices

If you use commercial chargers often, you can instead:

  • keep invoices from public / commercial chargers,
  • claim the actual dollar amounts paid.

If you choose this approach, you can't claim any home charging.

3. Mixed method (home + commercial charging)

This is the least common, but sometimes most beneficial, and it’s the method I personally use some years.

You can do this only if:

  • your vehicle can reliably report how much charging occurred at home vs elsewhere, and
  • you keep proper records i.e. odometer reading for the period covering each FBT year i.e. 1 April to 31 March

The method works like this:

  • home-charging distance → claimed at 4.2c/km (pro-rated based on charging ratio),
  • commercial charging → claimed using actual invoices.

The home-charging to commercial-charging ratio is derived from the energy split (kWh charged at home as a proportion of total charging).

Depending on:

  • your home electricity cost,
  • solar usage,
  • commercial charging mix,
  • and any free charging you get,

this mixed approach can result in a higher total deduction than using the shortcut alone.

Example:

From period of 1/4/2023 to 31/3/2024, an EV has driven 12,418km. According to the Tesla app, over this period, 1,447 kWh is charged at home out of 2,432 kWh total, which is 59.5%.

This means we can apportion the 12,418km to:

  • 7,389km (59.5%) charged at home
  • the rest charged elsewhere.

We then use the 4.2c/km rule to calculate the home-portion charging expense, alongside all the commercial charging invoices in this time period, and claim both amounts.

Why the ATO did it this way

The 4.2c/km shortcut is not meant to be perfectly accurate.

It is meant to be:

  • simple,
  • cheap to comply with,
  • and good enough for most people.

The ATO explicitly chose administrative simplicity over precision.

If your real costs are lower, you benefit. If your real costs are higher, you wear the difference.

The key takeaway

If you remember nothing else:

The 4.2c/km method is a tax deduction, not a reimbursement, and it is deliberately blind to how you actually charge your car.

For those with solar or cheap tariffs, it is surprisingly generous.

For others, more precise methods may make sense, but only if you are willing and able to do the record-keeping.

Reference

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