Ask an expert - Car allowance[ 13-Mar-2011 ]
A number of our employees are requesting a car allowance payable each week for using their own car instead of taking on a tool of trade vehicle. As this car allowance is taxable, does it then become superable? My understanding is that it is superable and taxable unless they apply to the ATO for a tax free allowance. Is this correct.
Employees receiving a car allowance (taxable/tax free), what are they being approved for eg maintenance, fuel, mileage etc as some of these employees are also submitting mileage reimbursement forms on top of receiving they’re allowance.
Although it may be outside my brief, can I suggest that if the employer wants to provide a vehicle for work use they would not need to agree to a request to pay a car allowance in stead of providing the vehicle..
On to your actual question and unfortunately the answer starts with, “It all depends.”
Firstly, it depends on the basis and expectation in regard to the payment.
If the value of the payment is a flat amount available to all who may use their car for business, then it would be superable. However, Superannuation Guarantee Ruling 2009/2 advises that “Expense allowances, that is, those allowances paid to an employee with a reasonable expectation that the employee will fully expend the money in the course of providing services, are not 'salary or wages'.” So, if you used a method of calculation by which it could reasonably expected that the whole of the allowance would expended by way of business use of the vehicle, it would not be superable.
In regard to your second question; generally a car allowance is considered to cover all expenses related proportionately to the business use of the vehicle. For that reason, it would seem unusual that “mileage” claims be accepted in addition, but of course there is an “however”. If the car allowance was established based on expected kilometres to be travelled and that figure was exceeded, then it would not be unreasonable to pay for those kilometres over what was expected.
It would be prudent to have a clear policy on tool of trade vehicles and payment of allowances. As always, first check if there are any Award or EBA obligations.
Chris Biddle C.P.S
Manager for Excellence Talent2
Manager for Excellence