In Australia, an employer can grant employees an allowance for using a personal vehicle for business journeys. An example of a business journey is driving to a client’s office for a client visit.
There is a maximum amount that employers can reimburse tax-free. This maximum amount is defined by the ATO and reviewed at the start of each income year (1 July). The rate for 2023-24 is 85 cents per kilometer.
You can pay your employees more than these maximum amounts, however, the excess will be considered taxable income. If you pay less than these amounts, the reimbursement is tax-free.
Additional notes on the mileage allowances in Australia:
- The maximum tax-free amount to be claimed per year is 5000 business kilometers per car;
- Written evidence to show how many kilometres the employee drove is not required. However, the ATO might request it to show how the business kilometres were calculated;
- The mileage rate includes all vehicle running expenses and depreciation, such as registration, fuel, servicing and insurance.