In the 2015-2016 Budget, the Federal Government announced significant changes to the methods for calculating work-related car expenses.

These reforms have now been passed and are applicable as from 1 July 2015

SUMMARY OF CHANGES:

Previous methods

From 1 July 2015

12% of original value

No longer available

One-third of actual expense

No longer available

Logbook

Logbook

Cents per kilometre – 3 rates determined by engine size

Cents per kilometre BUT at one set rate irrespective of engine size (66c per kilometre for 2015-2016 financial year)

IMPLICATIONS:

1. Individual taxpayers

    (a)  Only 2 methods for calculating and claiming work-related car expenses – use method which results in greater deduction.

2. Employers

    (a) No obligation to amend the rate they are currently paying to the Employee for work-related car expenses.

    (b) However, given that Employee can only claim at 66c per kilometre, if allowance rate is greater than 66c per kilometre, the Employer would need to withhold the portion of allowance which the Employee would not be able to claim.

    (c) Employers should consider updating allowance rate to match new single set rate to reduce administrative burdens going forward.

If you have any queries about these reforms and their implications for you, then please contact one of our Partners as soon as possible.