Hiya @OJW 👋
Firstly, in your question, each time you mention "employee" I assume you really meant "employer"?
Secondly, a c/km allowance is an allowance not a reimbursement because a reimbursement would require you to provide a tax receipt for the exact amount of expenditure. However, the c/km allowances is intended to compensate you for the approximate expense of using your private vehicle: registration, insurance, depreciation, fuel, maintenance, repairs etc. That can only ever be an approximate, hence an allowance to cover an assumed estimate of the cost.
Your employer is REQUIRED by the ATO to report c/km allowances as income, separately identified as an allowance.
Finally, you've misunderstood what the ATO rate actually is: it's the threshold to determine the PAYGW rate on your allowance, when the pre-conditions have been met (1. that the purpose of your travel was for business to earn your income; 2. that you own, lease or hire the car you used in your travel). What this means is that, whatever rate the employer pays, according to the award, agreement or policy, is compared against the ATO "reasonable rate" and, if it does not EXCEED that rate, then the tax is zero, up to a maximum of 5,000 business km paid in the FY. Any travel in excess of 5,000 km paid in the FY must be fully taxed, regardless of the rate paid in comparison to ATO's "reasonable rate".
ATO has great guidance to assist you to understand how to claim deductions for using your private vehicle for work purposes.
Deanne
Author: OJW(Initiate)Initiate 12 Sept 2023
Thank you for the detailed response Deanne!
And yes I did mean employer.
A couple of follow up questions to make sure I have understood this:
So now in my deductions should I claim my 5000km? I'm assuming not?
How does the ATO know how many km I have claimed and at what rate? does my employer communicate this?
From my understanding, as my rate of 0.68 is lower than the ATOs of 0.78, I should not be taxed on the allowance for the first 5000km ($3400), but I will be taxed on the additional 253km ($172)? Or as my rate is lower, will I not get taxed on any of it, as if i had claimed 5000km at 0.78 I would have received $3900, which is more than the $3572 I did receive?
Regardless if my first 5000km should not be taxed, why is it now showing up in my taxable income in my estimate? Is this inaccurate and will be corrected when I lodge my return and it is processed?
Hopefully the above is all clear and makes sense, sorry for all the questions just trying to understand the process 100%.
TIA
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