ATO Cents Per KM [2023 Car Allowance Guide]

ATO Cents Per KM [2023 Car Allowance Guide]


Whether or not you’re a finance supervisor attempting to type out worker reimbursements, or an worker attempting 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 the whole lot from eligible automobiles to what counts as mileage, easy methods to file your mileage (and when you should), and extra.  

What’s mileage reimbursement?

Mileage reimbursement—like something involving the ATO—could be a little complicated. To make issues extra difficult, 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 the event you’re unfamiliar: 

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

This mileage reimbursement fee is meant to take into consideration all the prices related to driving and proudly owning a car—issues like registration, gasoline, insurance coverage, servicing, even depreciation. 

Automobile allowance, however, usually refers to a reimbursement scheme corporations could use the place they offer staff a hard and fast quantity each month to cowl business-related driving bills. That is extra widespread at corporations the place staff steadily drive for enterprise, and it’s not primarily based on particular person month-to-month mileage. 

What counts as enterprise mileage

In fact, there are a variety of guidelines and {qualifications} round what counts for reimbursable enterprise mileage. 

Sometimes, the next varieties of driving might be reimbursed as enterprise mileage: 

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

Commuting between your property and office usually does not rely as enterprise mileage besides in uncommon circumstances. 

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

Learn how to use the mileage reimbursement methodology

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

You don’t want receipts or a logbook to say this deduction, however the ATO can ask for recorded proof of the way you calculated your small business mileage. Because of this, it’s a good suggestion to have staff hold file of their enterprise mileage anyhow, together with: 

  • how far they drove (in kms) 
  • the journey dates
  • the journey function / 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. 

Learn how to use the logbook methodology

The logbook methodology is extra difficult, but it surely additionally supplies extra flexibility. One caveat: the individual 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 the event you, or your staff, both: 

  • function a non-standard car for enterprise functions, similar to a van or bike, or
  • drive greater than 5,000km for enterprise every year, 

Briefly, the precise prices methodology requires you to—as you will have guessed—file and tally the precise prices associated to the enterprise use of your car, which you’ll then deduct out of your taxes. 

The logbook methodology has three steps: 

  • preserving your logbook 
  • preserving information and receipts of bills
  • calculating your deduction

We’ll take a look at every of those steps in flip so that you could simply perceive easy methods to use the logbook methodology. 

1. Conserving a logbook. 

Conserving a logbook is fairly simple, but it surely does require detailed file preserving. The excellent news is, it doesn’t have to log each enterprise drive you make for a whole tax 12 months! As an alternative, it merely must cowl at the very least 12 consecutive weeks which might be “broadly consultant” of the driving you do through the 12 months. 

For instance, when you’ve got a number of months which might be very busy with driving, and several other months that aren’t, your logbook ought to span each of these intervals with a purpose to be broadly consultant. In your logbook, you should embrace: 

  • the odometer studying at first and finish of every journey 
  • the vacation spot of every journey
  • the enterprise function of every journey 
  • whole 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 case 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 during which you probably did work-related driving. 

2. Conserving information and receipts

Along with your logbook, you should hold all receipts (or hold diary information of) motorcar bills. Deductible bills embrace: 

  • gasoline and oil receipts
  • registration prices
  • insurances 
  • automobile providers and common repairs 
  • tires and basic repairs 

You must also hold a file of your automobile’s depreciation worth, primarily based on the acquisition value. The ATO can ask you to offer an evidence for a way you identify depreciation, so be sure you use a typical depreciation formulation, and hold notes on the way you calculated it to your car. 

3. Calculating your deduction

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

To calculate the proportion of enterprise kilometres you drove, use the next formulation:

( [total number of kms traveled during the logbook period] / [total number of work-related kms driven during the logbook period] ) x 100 

This will provide you with the proportion of work-related mileage to your car use. 

Subsequent, add up the full bills for the interval you’re claiming—all the receipts and information you saved from step 2. 

Lastly, discover your work-related automobile bills by multiplying your work-related share by the full quantity of precise bills. That is the quantity you’ll be able to declare as your deduction. So, for instance, in case your logbook and the above formulation determines that about 60% of your total mileage is work-related, you’re eligible to say 60% of your whole 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 might 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. 

Sometimes, the ATO updates this reimbursement fee at the start of every monetary 12 months in July, so keep tuned for updates. 

Drivers who function vans, bikes or vehicles that carry extreme masses (higher than one tonne) may obtain mileage reimbursements from their employer. Nevertheless, the enterprise mileage tax deductions with the ATO are totally different. With a view to deduct enterprise mileage from these automobiles, you’ll must use the precise prices (logbook) methodology as a substitute of the cents per km methodology. 

Employers can select to reimburse staff for mileage at any fee, together with one decrease or increased than the set ATO fee. Any quantity reimbursed per km at or below 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 dependent upon the method used. 

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

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

In case 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 widespread, and a optimistic profit for workers, but it surely’s not tax-deductible for employers. Staff, nevertheless, can nonetheless declare a tax deduction for enterprise miles pushed utilizing the cents per km methodology. 

In case you use an precise prices reimbursement methodology, reimbursing staff primarily based on a logbook of receipts for particular expenditures, your small business can declare a tax deduction for any reimbursement you present. As well as, these reimbursements are usually not thought-about taxable earnings for workers. 

Continuously 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’ll be able to declare as much as 5,000km of enterprise mileage for tax deduction in the event you’re not reimbursed instantly out of your employer. In case you drive greater than that for enterprise every year, you need 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 dependent upon 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. 

Nevertheless, in case your employer makes use of a automobile allowance methodology that’s thought-about 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 staff for mileage on the set ATO fee? 

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

Nevertheless, 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 car bills are tax deductible?

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

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

You may deduct the next car bills associated to enterprise journey: 

  • gasoline and oil bills
  • registration prices
  • car insurances
  • lease funds and curiosity fees
  • depreciation worth
  • automobile providers 
  • tires and repairs 
  • electrical energy fees

You can’t declare: 

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

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


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