Car expense substantiation methods made easy
To simplify the car expense deduction rules, from 1 July 2015, the government abolished the one-third of actual expenses method and 12% of original value method. The cents per kilometre method (with the existing 5,000km cap) and the logbook method (with unlimited kms) remain.
The cents per kilometre method has been simplified to use a standard rate of 66 cents per kilometre for the 2015-16 income year, rather than a rate based on the engine size of the car. The Commissioner will set the rate for future income years.
The ATO has advised employers to be aware that the ATO set the approved PAYG withholding rate for cents per kilometre car allowances at 66 cents per kilometre from 1 July 2015. Employers should withhold from any amount above 66 cents for all future payments of a car allowance. Failure to do so may result in the employee having a tax liability when he or she lodges a tax return.
Employees who from 1 July 2015 have been paid a car allowance at a rate higher than the new approved amount should consider whether they need to increase their withholding to avoid any tax liability at the end of the year.
Contact us below or call 1300 627 829 if you require more information about this change.
