23 February, 2021

Is ATO mileage reimbursement taxable income?

UPDATED FEB 22, 2021 • 2 MIN READ

The short answer is that mileage reimbursement might be taxed as income, and it also might not be. Here we will quickly go over when your reimbursements for work-related car expenses are taxed as income and when they are not. Generally, travel between home and work is considered private and cannot be claimed in your tax deduction. However, there are certain costs of travelling which can be claimed such as your mileage for business-related tasks which can usually be reimbursed. 

Is my mileage reimbursement taxed?

This depends on how your employer processes your claim. 

1. If your employer provides an allowance for car expenses, this would be taxed as it would be shown on your payment summary and needs to be declared as income on your tax return.
2. If your employer reimburses your specific car expenses and these are taxed on your payment summary, you can claim these as a deduction in your tax return.
3. If your employer reimburses your specific car expenses and these are not taxed, you cannot claim these as a deduction as you have not paid any tax on those expenses.

A car allowance is taxed

If your employer provides an allowance for your work-related car expenses - that is, they make a separately identified payment for your expenses including for a car - that allowance is taxed. For more on this, see the ATO’s feedback on allowances.

Mileage reimbursement is (almost always) not taxed

If your employer reimburses you only for the work-related expenses that you incurred (for example, fuel, parking, and road tolls), or if they used a standard mileage rate based on your actual business kilometres driven, this reimbursement is almost always tax-free. 

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 my reimbursed car expenses at tax time?

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. 

That's it for our guide on if mileage reimbursements is taxable income in Australia. We hope we've been of assistance :)

Happy tracking! 

 

Related articles

• The current ATO mileage rate for business
• How to calculate mileage reimbursement
• Do I need to reimburse employees? Rules for employers

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This material has been prepared for general informational purposes only, and should not be taken as professional advice from Driversnote. You should consider seeking independent legal, taxation, or financial advice from a professional to check how this information relates to your own circumstances. Relevant laws also change from time to time.