Country guide · Canada

Canada's per-kilometre rate is not for a sole proprietor — and the full log you keep once buys a three-month sample afterwards

Who the rate is actually for

ITR 7306 opens "For the purposes of paragraph 18(1)(r) of the Act…", and ITA 18(1)(r) limits a deduction for "an amount paid or payable by the taxpayer as an allowance for the use by an individual of an automobile".

Read that twice, because two common beliefs fall out of it.

It is not a limit on what an employer may pay you. It caps what the payer may deduct. The employee's own side is ITA 6(1)(b)(vii.1), which exempts an allowance "based on the per-kilometre rates prescribed in section 7306" and otherwise says only "reasonable". An employer may pay more than 73 cents; the excess is taxable in your hands rather than forbidden.

And it does not reach a sole proprietor at all. A sole proprietor pays themselves no allowance, so neither provision engages.

The 2026 figures are 73 cents for the first 5 000 kilometres and 67 cents after — a lower band, not a cap, unlike Australia's discard — with 4 cents more per kilometre in the Northwest Territories, Yukon and Nunavut.

What a sole proprietor claims instead

Actual costs, apportioned by business kilometres over total kilometres. T4002 chapter 3 lists them: licence and registration fees, fuel and oil, electricity for zero-emission vehicles, insurance, interest, maintenance and repairs, and leasing costs — plus capital cost allowance, under 2026 ceilings of $39,000 for Class 10.1, $61,000 for a Class 54 zero-emission vehicle, $1,100 a month on a lease and $350 a month on interest.

Which means the log matters more, not less. The deduction is a fraction, and the log is what establishes the numerator.

What the log holds

The CRA's own words: "For each business trip, keep a log listing the following: date, destination, purpose, number of kilometres you drive."

And separately: "Record the odometer reading of each vehicle at the start and end of the fiscal period."

No per-trip odometer. Canada asks for the reading at the two fiscal-period boundaries only — the same shape as South Africa's two tax-year boundaries. An employee claiming an allowance keeps less still: a log of all kilometres and, per trip, "the date, destination and purpose", with no odometer anywhere. An employee claiming actual costs on a T777 records the four per-trip items and the reading at the beginning and again at the end of the year.

The base year and the three-month sample

Keep one complete 12-month base-year logbook. Afterwards a three-month sample period suffices, provided the business-use percentage from the sample stays within 10 percentage points of the base year, and the published formula scales it.

This is the rule that makes the first full year worth doing properly. The base year is not a year of paperwork; it is the year that buys the following years off.

Two traps that void the allowance entirely

Both sit in the same paragraph as the exemption, and neither taxes an excess — they void the whole allowance:

• ITA 6(1)(b)(x) — where "the measurement of the use of the vehicle…is not based solely on the number of kilometres". A flat monthly amount with a per-kilometre top-up is not solely per kilometre.
• ITA 6(1)(b)(xi) — where the employee "both receives an allowance in respect of that use and is reimbursed in whole or in part". Tolls, ferries and supplementary business insurance are excepted; fuel is not.

Six years, and up to eleven

"The logbook for the full 12-month period must be kept for a period of six years from the end of the tax year for which it is last used to establish business use."

Read the last clause carefully. A base-year log relied on for five later years is last used to establish business use in the fifth of them — so it must be kept up to eleven years from the year it was written. The six-year figure is right and the start date is not the one people assume.

What failure costs

The business-use percentage is the figure that collapses first, and it is a multiplier on everything else.

Why an app rather than a notebook

Nothing above requires software; four fields and two odometer readings fit in a glovebox notebook, which is where the CRA's own examples put them. What software changes is the twelve months in the middle. A base year is a year long, and a base year with a fortnight missing is not a base year — it is an ordinary year that no longer buys the three-month sample.

DriveHub records each drive in the background and asks afterwards which were business. The report prints the date, the destination, the purpose in your own words and the kilometres, and the fiscal-year opening and closing readings as their own block. The three-month window is a period preset, so the sample period is something you select rather than something you count out and hope is representative.

What it will not do is calculate a per-kilometre amount for a Canadian sole proprietor, because there is none to calculate. It says so on the rate screen instead of showing 73 cents to somebody the provision does not reach.

This page states what the Act, the Regulations and the CRA's own guidance say, and names them so you can check. It is not tax advice. It can't account for your circumstances. Where money is involved, ask your accountant — and bring the logbook.