Is car expenses reimbursement taxed?
Depending on the reimbursement method, you might have to pay income tax on your car expenses reimbursement.
If you have questions about car allowance tax, car expenses reimbursement tax and more, read on to find out what rules apply to your situation.
If, as an employee, you are reimbursed by your company for business-related car expenses, you might have to pay income tax depending on the method the company uses. The two most common methods of reimbursing employees in Australia are:
- a cents per km rate, or an actual expenses reimbursement
- a car allowance lump sum.
You might receive car expenses reimbursement through one or both methods at the same time. The cents per kilometre rate serves to compensate you for the car expenses in connection to driving your car for work purposes, while the car allowance serves in place of being provided with a company car. Read more about what the two methods entail in our guide for employee reimbursement.
Depending on how your employer processes your car expenses claim, your reimbursement might be taxed.
Cents per km reimbursement tax
If your employer reimburses you only for the work-related expenses that you incurred (for example, fuel, parking, and road tolls), or if they use a standard cents per km rate based on your actual business kilometres driven, this reimbursement is tax-free.
However, keep in mind that if you are reimbursed at a higher rate than the official one ATO has issued, the excess will be taxed as income.
Car allowance tax
Is car allowance taxable? The short answer is yes. Car allowance is considered a benefit, and not reimbursement and should appear on your payslip every time you receive the allowance. Car allowance is always taxed as part of your income. Car allowance tax is calculated based on your income tax bracket and will be taxed the same percentage.
How do I know if my mileage reimbursement was taxed?
If your payment summary from your employer shows that tax was withheld, then your reimbursement was taxed. If the payment summary doesn’t withhold any tax, then your reimbursement was tax-free. If you are in doubt, you can always ask your employer or accountant for help.
Can I still claim car expenses at tax time if I was reimbursed by my employer?
One important thing to remember - if you are reimbursed for your expenses and no tax was withheld, you can’t “double-dip” and also claim them as a tax deduction. This is because you have no longer paid the initial GST for those expenses - your employer has (by reimbursing you).
On the other hand, if your reimbursement had tax withheld, you can then claim those specific expenses as a deduction at tax time.
How to automate your mileage logbook
ATO Mileage Guide
- Historic cents per km rates
- For employers
- Calculate your car expenses reimbursement
- Is mileage reimbursement taxed?
- ATO logbook requirements
- For self-employed
- For employees
- ATO car expenses deductions
- ATO cents per km rate 2021/2022
- ATO cents per km rates 2020/2021