Hi all!
Hoping I might be able to get some help from someone! I am a small business owner and relatively new to this world. When I was working for a large corporation, I was told that where the kilometer reimbursement paid to employees is above the ATO rate, that the additional amount is taxed e.g. ATO rate $0.88 cents but award rate $0.99 cents therefore $0.11 cent difference.
I am getting confused however, as I have read something about you do not pay tax on the km allowance, regardless of the amount for the first 5,000 km then anything after 5,000 km, the additional amount paid above the ATO rate of $0.88 is charged. If I use the example below, I am hoping this might clarify.
So - the ATO reimbursement rate for 24/25 is $0.88 cents per km. However, the SCHADS (Social, Commuity, Home Care and Disability Services) Award says the rate to be paid is $0.99 cents per km.
Scenario 1:
Employee does 6,500 km in the year. The first 5,000 km is paid at $0.99 and nothing is taxed up to the 5,000km even if the reimbursement rate is $0.11 cents per km more (SCHADS rate of $0.99 minus ATO rate of $0.88 leaves $0.11 difference). Therefore, for the 1,500 kms above the 5,000, then the ATO rate of $0.88 cents per km is not taxable but the $0.11 is.
Scenario 2:
Regardelss of whether kms is above or below the 5,000 km, the ATO reimbursement rate of $0.88 is not taxed. But, the $0.11 cents per km is.
If tax is payable, I will assume the best way to process this for payroll is to have an allowance line that is for the ATO km rate reimbursement (which means not taxable) then have another allowance line for the additinonal amount which is taxable?
I thank you in advance for your help!
Thanks El
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