Car Km allowance is paid to employees using their own vehicle (car) for work purposes. The Allowance is a reimbursement of the km driven for business. When the allowance rate is paid up to the ATO's statutory rate for the Financial Year, this should be paid exempt of Tax and Super, up to 5,000km per annum. Any rates paid above the ATO threshold and or any km reimbursed over 5,000 per annum, must be taxed. 

For more information on how Car Allowances are paid in Australia, please refer to our Car Allowance Factsheet.

Set up the Car Allowance Pay Item

1. From the Organisation Menu, go to Settings > Payroll Settings
2. Select the [Pay Items] >[Earnings] Tab
3. Click on [Add] > Allowance
   
   

   è  The Allowance Pay Item screen opens
   
   
   
   

4. Select/Enter the following details:
   • Earnings Name > Type: Car Km Allowance
   • Type > Select: Car
   • Display Name> Type: Car Km Allowance
   • Rate Type > Select: Rate per Unit
   • Type of Units > Type either Km or Hours (if you want to enter the Km in a Timesheet)
   • Amount > Type the ATO statutory amount for the year
   • Expense Account > Select: Wages & Salaries (or Wages - Allowances)
   • Exempt from PAYG > Select this option
   • Exempt from Super > Select this option
   • Reportable as W1 > Select this option
5. Click on [Add]

Add the Car Allowance Pay Item to the Employee's Pay Template

1. Go to Payroll > Employees
2. Open the Employee details and click on the [Pay Template] Tab
3. Click on [+Earnings Line]
4. Select/Enter the following details:
   • Earnings Rate > Select: Car Km Allowance
   • Calculation Type > Select: Use Earnings Rate 
5. Click on [OK]
   
   
   
   è The Earnings Line is added to the Employee's Pay Template
   
   
6. Click on [Save]