A car allowance is what an employer gives employees for the business use of their personal vehicle to cover the cost of fuel and general wear-and-tear. A car allowance in Australia can be paid either as a set amount over a given time period or as a reimbursement cost calculated per Km recorded during work-related travel. More information is available on the ATO Website.

Car Allowance as a Set Amount

Car allowance can be paid to Employees who use their personal vehicles as a periodical salary amount. This allowance is defined by the ATO as an ‘Allowance by way of unconditional extra payment’ and therefore is subject to both PAYG and Superannuation. Some Fair Work Awards may outline different conditions for Car Allowance. Please refer to your Industry standard Award for more information. Generally, this allowance is reported in Single Touch Payroll under 'Gross Earnings'.

Car Allowance as Km Reimbursement

This is where a set amount per KM is paid to the Employee for use of their own vehicle. The employee must keep a log book for all work-related trips for the employer to pay.

The ATO sets out a specific rate per km which applies to all types of vehicles. The rate is reviewed every year and amended every few years. The rate set out by the ATO is tax free and exempt from Superannuation and it is applied to a maximum of 5,000 business kilometres per vehicle, per year. Any Allowance paid for Kms travelled over the first 5,000 must be taxed.  

Some Fair Work Awards still pay a higher allowance per KM driven, in this case the difference between the statutory ATO rate and the Fair Work rate is taxed (however Superannuation is not calculated).

This Allowance is reported through Single Touch Payroll as Allowance - Car

More information is available on the ATO Website.