ATO Definition of Car Allowance

 Author: PayrollDeanne(Taxicorn)Taxicorn

16 Dec 2022

Hiya @ProfessorFalkan

Rules for remunerating employees are set by Fair Work. How your employer chooses to NAME their payment and what they pay it FOR doesn't actually align to an explicit ATO definition. That's not how it works.

It's all about the PURPOSE and CIRCUMSTANCES of the payment - that's what defines the ATO treatment of income (PAYGW, Super Guarantee, STP).

One option is that you may be paid an allowance that is MEASURED by your employer requiring you to claim specifically for the distances you travel in a private vehicle (C/Km Allowance) that has explicit ATO guidance with specific criteria to be met (purpose of travel, type and ownership of vehicle, rate/km vs the ATO rate; and total # km vs the ATO limit of business km). These types of allowances are intended to cover a range of costs.

Some employers pay their employees c/km allowance, transport allowances, fares allowances ... a range of industrial remuneration benefits. Some choose to reimburse their employees for exact costs, evidenced by receipts. There's not just one option, but many.

For example, your employer appears to pay you an allowance to cover the costs of transport without specifying HOW you spend that money (private vehicle, public transport, parking, tolls), nor requiring you to claim for the distances you travel.

The ATO provide guidance about what kinds of work-related deductions you can claim, but they don't restrict how your employer remunerates you for your work.

I hope that helps - Deanne