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 all the pieces from eligible autos to what counts as mileage, the way to report your mileage (and when you have to), 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 price that staff are reimbursed per kilometre for enterprise mileage. The ATO (Australian Taxation Workplace) units a regular mileage reimbursement price, which is at the moment $0.78. 

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

Automobile allowance, however, sometimes refers to a reimbursement scheme corporations might use the place they provide staff a set quantity each month to cowl business-related driving bills. That is extra frequent at corporations the place staff regularly drive for enterprise, and it’s not based mostly 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 kinds of driving could be reimbursed as enterprise mileage: 

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

Commuting between your house and office sometimes does not depend as enterprise mileage besides in uncommon circumstances. 

To reimburse your staff for mileage—or to get reimbursed, if you’re 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 option 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 corporation mileage. Because of this, it’s a good suggestion to have staff preserve report of their enterprise mileage anyhow, together with: 

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

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

Learn how to use the logbook methodology

The logbook methodology is extra difficult, nevertheless it additionally gives 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 the event you, or your staff, both: 

• function a non-standard car for enterprise functions, equivalent 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’ll have guessed—report and tally the precise prices associated to the enterprise use of your car, which you’ll be able to then deduct out of your taxes. 

The logbook methodology has three steps: 

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

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

1. Protecting a logbook. 

Protecting a logbook is fairly easy, nevertheless it does require detailed report maintaining. The excellent news is, it doesn’t have to log each enterprise drive you make for a whole tax yr! As an alternative, it merely must cowl not less than 12 consecutive weeks which are “broadly consultant” of the driving you do throughout the yr. 

For instance, you probably have a number of months which are very busy with driving, and several other months that aren’t, your logbook ought to span each of these intervals with the intention to be broadly consultant. In your logbook, you have to embody: 

• the odometer studying at the beginning and finish of every journey 
• the vacation spot of every journey
• the enterprise goal 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. When you’re reusing a logbook from a earlier yr for this yr’s tax return, you additionally want to incorporate odometer readings from the beginning and finish of the present tax yr, or the interval of the yr wherein you probably did work-related driving. 

2. Protecting data and receipts

Along with your logbook, you have to preserve all receipts (or preserve diary data of) motorized vehicle bills. Deductible bills embody: 

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

You also needs to preserve a report of your automobile’s depreciation worth, based mostly on the acquisition value. The ATO can ask you to supply an evidence for the way you identify depreciation, so you’ll want to use a regular depreciation method, and preserve notes on the way you calculated it on your car. 

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 provides you with the share of work-related mileage on your car use. 

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

Lastly, discover your work-related automobile bills by multiplying your work-related share 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 method determines that about 60% of your general 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 straightforward vehicles which are designed to hold lower than one tonne and fewer than 9 passengers. 

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

Sometimes, the ATO updates this reimbursement price at the start of every monetary yr 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. Nevertheless, the enterprise mileage tax deductions with the ATO are totally different. With a purpose to deduct enterprise mileage from these autos, you’ll need to 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 price, together with one decrease or increased than the set ATO price. Any quantity reimbursed per km at or below the ATO price is taken into account non-taxable earnings. For any quantity reimbursed above the present ATO price, the quantity paid out above the present price is taxable earnings. 

Is automobile allowance taxable in Australia?

The taxation of automobile allowances is dependent upon the method used. 

When 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 yr per automobile. Whereas corporations can reimburse staff for distances above 5,000km, the quantity reimbursed over 5,000km shouldn’t be tax-deductible utilizing the cents-per-km methodology. (It is tax-deductible in the event you use the precise value or logbook methodology.) 

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

When 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, nevertheless it’s not tax-deductible for employers. Staff, nevertheless, can nonetheless declare a tax deduction for enterprise miles pushed utilizing the cents per km methodology. 

When you use an precise prices reimbursement methodology, reimbursing staff based mostly 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-about taxable earnings for workers. 

Ceaselessly 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 could be reimbursed for as much as 5,000kms with out receipts utilizing the kilometre price. Alternatively, you may declare as much as 5,000km of enterprise mileage for tax deduction in the event you’re not reimbursed instantly out of your employer. When you drive greater than that for enterprise every year, you must 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 not 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 price? 

No, employers can set their very own per-km charges to reimburse staff which are both roughly than the usual ATO price. 

Nevertheless, any quantity per km above the usual ATO price is taken into account taxable earnings, so pay attention to taxation points which will come up at tax time. 

What car bills are tax deductible?

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

• staff, if your employer doesn’t give 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 costs
• depreciation worth
• automobile providers 
• tires and repairs 
• electrical energy costs

You can not declare: 

• capital prices, i.e. the acquisition value of your automobile 
• enchancment prices, i.e. tinted home windows, winter safety, and so forth.
• 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 completed utilizing the logbook methodology (see above), and is Most worthy in the event you drive greater than 5,000km yearly for enterprise functions.