Car Allowance Guide For Employees In Australia
Are you wondering "what is car allowance, and how does it work?", then you have come to the right place.
As an employee in Australia it is common to have to use your car for work purposes from time to time. This increases the mileage, fuel, and general wear and tear on your car, which means it becomes an expense that you would need to pay for out of your income.
How a car allowance for employees works
Many employers offer a car allowance in Australia as part of the salary package offered to employees who need to use their car as part of their job. A car allowance is an additional payment to specifically cover motor vehicle expenses.
The advantage to the employer over offering a company car is that there is no fringe benefits tax (FBT) applicable and all running and maintenance costs for the vehicle are the responsibility of the employee rather than the employer.
A car allowance in your salary package is considered a part of your taxable income and is taxed at the normal marginal rates. You can, however, claim the business portion of the usage of your car allowance from the ATO using either the cents per kilometre method or the logbook method.
For more information information about claiming a deduction for your business kilometres in Australia see our comprehensive guide on ATO rules for work-related kilometres claim.
How you can use your car allowance
You can use your car allowance for any purpose related to owning and running a vehicle, including purchasing a vehicle, either outright or towards payments on a loan or lease, fuel, registration and maintenance costs. It is at your discretion how you use the car allowance from your employer. However, to be able to claim your car expenses from the ATO as a deduction, you would need to show that the usage was work-related, such as:
- Travelling to a client meeting that was not held at your office;
- Working onsite at a client’s premises that is not your regular workplace; or
- Travelling to a conference or trade show.
Find out how to keep a compliant log book for tax.
Receiving reimbursement for business driving while getting a car allowance
Because a car allowance in Australia is paid by the employer as part of the salary package, there is no specific reimbursement paid to employees as they have already received the money to cover car-related expenses.
If there were a specific expense that lay outside normal usage of the car allowance from your employer, then you could discuss it with them about being reimbursed. An example of an additional expense could be expensive parking fees for visiting a client in a central business district location.
Learn about the rules of reimbursing employees for their car expenses or deducting expenses as an employee or self-employed individual.
If you are claiming vehicle expenses for business purposes, you must keep proper records in order for the ATO to approve your claim. We will walk you through...
The days of manually documenting a week's worth of information and struggling to remember the work errand you were running around 6:30 p.m. last Thursday are long gone, thanks to mobile apps that track your trips and produce compliant mileage logs.