Changes to car allowances
Employers are reminded that if you pay staff a car allowance, you need to withhold tax on any amount you pay that is more than 66 cents per kilometre from July 1, 2015.
If you haven’t been doing this, it may be an idea to start now to avoid employees having a tax debt.
Even though the 66 cents amount was legislated in September 2015, the amount applies retrospectively from July 1, 2015.
Also consider pre-existing car allowance arrangements that have remained unchanged for this financial year. Employers should enquire with relevant employees whether they would prefer to increase the withholding amount for the remainder of the financial year to cover any possible shortfall.
Recap on car expense substantiation method changes
The government reduced the options for car expense deductions from July 1, 2015. Before this, there were four methods for calculating a deduction for work related vehicle use (cents per kilometre, log book, 12% of original value and one-third actual expenses methods).
From July last year, the government abolished the one-third of actual expenses method and 12% of original value method, leaving the cents per kilometre method (still with a 5,000km cap) and the logbook method (with unlimited kms).
There is no change to the principle that work related car expenses are deductible, and no impact on salary packaged cars.
Source: Taxpayers Australia.