ATO Cents Per KM [2023 Car Allowance Guide]

Whether or not you’re a finance supervisor making an attempt to type out worker reimbursements, or an worker making an attempt to see what you will get reimbursed for after driving to that convention final weekend, our information to automobile mileage allowances in Australia ought to assist.

On this information, we’ve lined every thing from eligible automobiles to what counts as mileage, tips on how to document your mileage (and when it is advisable), and extra.  

What’s mileage reimbursement?

Mileage reimbursement—like something involving the ATO—could be a little complicated. To make issues extra sophisticated, some phrases—like “mileage reimbursement” and “automobile allowance”—are used interchangeably, though they’re not fairly the identical. 

Right here’s a fast primer in case you’re unfamiliar: 

Mileage reimbursement refers to a set fee that workers are reimbursed per kilometre for enterprise mileage. The ATO (Australian Taxation Workplace) units a regular mileage reimbursement fee, which is presently $0.78. 

This mileage reimbursement fee is meant to keep in mind the entire prices related to driving and proudly owning a automobile—issues like registration, gasoline, insurance coverage, servicing, even depreciation. 

Automotive allowance, alternatively, sometimes refers to a reimbursement scheme corporations might use the place they offer workers a hard and fast quantity each month to cowl business-related driving bills. That is extra frequent at corporations the place workers regularly drive for enterprise, and it’s not primarily based on particular person month-to-month mileage. 

What counts as enterprise mileage

After all, there are a selection of guidelines and {qualifications} round what counts for reimbursable enterprise mileage. 

Usually, the next kinds of driving might be reimbursed as enterprise mileage: 

• driving to conferences or conferences which can be for enterprise however not at your typical office 
• operating errands or getting provides for the enterprise
• touring out of your ordinary office to a secondary or alternate workplace (i.e. a second workplace or a shopper’s workplace for a enterprise assembly) 
• touring between two or extra locations of employment, for instance, when you’ve got multiple job
• happening buyer visits 

Commuting between your own home and office sometimes does not rely as enterprise mileage besides in uncommon circumstances. 

To reimburse your workers for mileage—or to get reimbursed, in case you are an worker—there are two main strategies: the mileage reimbursement methodology (the straightforward method) or the logbook methodology (the extra detailed method). 

use the mileage reimbursement methodology

The kilometre methodology is the simplest technique to reimburse workers for mileage or declare business-related mileage tax deductions. 

You don’t want receipts or a logbook to assert this deduction, however the ATO can ask for recorded proof of the way you calculated your corporation mileage. Because of this, it’s a good suggestion to have workers maintain document of their enterprise mileage anyhow, together with: 

• how far they drove (in kms) 
• the journey dates
• the journey objective / enterprise relation 

To calculate worker’s mileage reimbursements, you merely multiply the variety of kms they drove by the present reimbursement fee ($0.78) to determine their reimbursement quantity. 

use the logbook methodology

The logbook methodology is extra sophisticated, but it surely additionally offers extra flexibility. One caveat: the particular person claiming deductions utilizing the logbook methodology should personal the automobile they’re driving. You’ll want to make use of the logbook (or precise prices) methodology in case you, or your workers, both: 

• function a non-standard automobile for enterprise functions, akin to a van or motorbike, or
• drive greater than 5,000km for enterprise annually, 

In brief, the precise prices methodology requires you to—as you might have guessed—document and tally the precise prices associated to the enterprise use of your automobile, which you’ll be able to then deduct out of your taxes. 

The logbook methodology has three steps: 

• conserving your logbook 
• conserving data and receipts of bills
• calculating your deduction

We’ll have a look at every of those steps in flip so to simply perceive tips on how to use the logbook methodology. 

1. Retaining a logbook. 

Retaining a logbook is fairly simple, but it surely does require detailed document conserving. The excellent news is, it doesn’t have to log each enterprise drive you make for a complete tax 12 months! As an alternative, it merely must cowl a minimum of 12 consecutive weeks which can be “broadly consultant” of the driving you do through the 12 months. 

For instance, when you’ve got a number of months which can be very busy with driving, and a number of other months that aren’t, your logbook ought to span each of these durations with a purpose to be broadly consultant. In your logbook, it is advisable embody: 

• the odometer studying initially and finish of every journey 
• the vacation spot of every journey
• the enterprise objective of every journey 
• complete variety of kilometres traveled throughout every interval 
• odometer readings for the beginning and finish of the logbook interval

So long as your work and driving circumstances don’t change, your logbook will proceed to be legitimate for 5 years. In the event you’re reusing a logbook from a earlier 12 months for this 12 months’s tax return, you additionally want to incorporate odometer readings from the beginning and finish of the present tax 12 months, or the interval of the 12 months by which you probably did work-related driving. 

2. Retaining data and receipts

Along with your logbook, it is advisable maintain all receipts (or maintain diary data of) motorized vehicle bills. Deductible bills embody: 

• gasoline and oil receipts
• registration prices
• insurances 
• automobile companies and common maintenance 
• tires and common repairs 

You must also maintain a document of your automobile’s depreciation worth, primarily based on the acquisition worth. The ATO can ask you to offer a proof for a way you identify depreciation, so remember to use a regular depreciation system, and maintain notes on the way you calculated it to your automobile. 

3. Calculating your deduction

Lastly, even with the precise prices methodology, you may’t deduct the total quantity of each value associated to your automobile—solely that which is proportionate to your work-related journey.

This will provide you with the share of work-related mileage to your automobile use. 

Subsequent, add up the whole bills for the interval you’re claiming—the entire receipts and data you saved from step 2. 

Lastly, discover your work-related automobile bills by multiplying your work-related proportion by the whole quantity of precise bills. That is the quantity you may declare as your deduction. So, for instance, in case your logbook and the above system determines that about 60% of your general mileage is work-related, you’re eligible to assert 60% of your complete automobile bills as a deduction.  

What are the automobile allowance charges in Australia for 2023?

In Australia, enterprise mileage reimbursement charges solely apply to plain vehicles which can be designed to hold lower than one tonne and fewer than 9 passengers. 

The ATO mileage reimbursement fee for 2022 – 2023 is $0.78 / km. 

Usually, the ATO updates this reimbursement fee firstly of every monetary 12 months in July, so keep tuned for updates. 

Drivers who function vans, bikes or vehicles that carry extreme hundreds (better than one tonne) also can obtain mileage reimbursements from their employer. Nonetheless, the enterprise mileage tax deductions with the ATO are totally different. As a way to deduct enterprise mileage from these automobiles, you’ll should use the precise prices (logbook) methodology as an alternative of the cents per km methodology. 

Employers can select to reimburse workers for mileage at any fee, together with one decrease or larger than the set ATO fee. Any quantity reimbursed per km at or underneath the ATO fee is taken into account non-taxable earnings. For any quantity reimbursed above the present ATO fee, the quantity paid out above the present fee is taxable earnings. 

Is automobile allowance taxable in Australia?

The taxation of automobile allowances is determined by the method used. 

In the event you’re utilizing mileage reimbursements, these reimbursements are tax-deductible for sole merchants or small companies who reimburse workers as much as 5,000km per 12 months per automobile. Whereas corporations can reimburse workers for distances above 5,000km, the quantity reimbursed over 5,000km just isn’t tax-deductible utilizing the cents-per-km methodology. (It is tax-deductible in case you use the precise value or logbook methodology.) 

Mileage reimbursements utilizing the kilometre methodology are additionally thought of tax-free for workers. 

In the event you use a automobile allowance scheme, the automobile allowance is taken into account taxable earnings for each the worker and employer. Giving flat-rate automobile allowances is sort of frequent, and a constructive profit for workers, but it surely’s not tax-deductible for employers. Workers, nonetheless, can nonetheless declare a tax deduction for enterprise miles pushed utilizing the cents per km methodology. 

In the event you use an precise prices reimbursement methodology, reimbursing workers primarily based on a logbook of receipts for particular expenditures, your corporation can declare a tax deduction for any reimbursement you present. As well as, these reimbursements will not be thought of taxable earnings for workers. 

Often Requested Questions on mileage reimbursement

Nonetheless have extra questions? We’re right here to assist. 

What number of kms are you able to declare for reimbursement with out receipts? 

In Australia, you might be reimbursed for as much as 5,000kms with out receipts utilizing the kilometre fee. Alternatively, you may declare as much as 5,000km of enterprise mileage for tax deduction in case you’re not reimbursed immediately out of your employer. In the event you drive greater than that for enterprise annually, it is best to use the precise prices methodology to get a extra correct reimbursement. 

As an worker, ought to I declare mileage deductions on my taxes if I drive for work? 

This is determined by your employer’s reimbursement scheme. 

In case your employer reimburses you for enterprise mileage utilizing a cents-per-km methodology, you can’t declare enterprise mileage deductions in your taxes, as you’ve already been correctly reimbursed for it. 

Nonetheless, in case your employer makes use of a automobile allowance methodology that’s thought of taxable earnings for you, you can declare enterprise mileage deductions in your taxes utilizing the ATO’s cents-per-km methodology. 

As an employer, do I’ve to reimburse workers for mileage on the set ATO fee? 

No, employers can set their very own per-km charges to reimburse workers which can be both kind of than the usual ATO fee. 

Nonetheless, any quantity per km above the usual ATO fee is taken into account taxable earnings, so concentrate on taxation points that will come up at tax time. 

What automobile bills are tax deductible?

Automobile bills for business-related journey are tax-deductible for: 

• workers, if your employer doesn’t offer you a tax-free reimbursement scheme, or 
• employers, if you reimburse workers for automobile bills utilizing an precise prices methodology. 

You’ll be able to deduct the next automobile bills associated to enterprise journey: 

• gasoline and oil bills
• registration prices
• automobile insurances
• lease funds and curiosity costs
• depreciation worth
• automobile companies 
• tires and repairs 
• electrical energy costs

You can’t declare: 

• capital prices, i.e. the acquisition worth of your automobile 
• enchancment prices, i.e. tinted home windows, winter safety, and so forth.
• particular person bills in case you’re already claiming, or being reimbursed for, mileage utilizing a cents-per-km scheme

Claiming particular person bills is completed utilizing the logbook methodology (see above), and is most precious in case you drive greater than 5,000km yearly for enterprise functions.