Private ruling: Income - Allowances
Published: June 2012
Ruling period: Year ending 30 June 2012
Date scheme commenced: 1 July 2011

Ruling: Q1: Is the payment you receive from your employer an assessable allowance? | A1: Yes

Relevant facts and circumstances: Your employment duties require you to use your own car to travel between different work locations. You are expected to keep records of the kilometres you have travelled for work and provide your employer the details at the end of each month. Your employer then pays you an amount based on the number of kilometres you have travelled and the rates published by the ATO. You have travelled in excess of 5,000 kilometres this financial year, and as a result your employer has begun to withhold income tax from these payments.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5.

Reasons for decision: Summary: Taxation Ruling TR 92/15 discusses the differences between allowances and reimbursements. An allowance is generally the payment of a definite predetermined amount to cover an estimated expense, and will be paid regardless of whether the recipient incurs the expected expense. A reimbursement on the other hand, is where the recipient is compensated exactly (meaning precisely, as opposed to approximately), whether wholly or partly, for an expense already incurred although not necessarily disbursed. Paragraph 18 of Taxation Ruling TR 95/14 states that if motor vehicle expenses are reimbursed by an employer on a cents per kilometre basis, the amount is included as assessable income of the employee. Although this ruling relates to employee teachers, the principles can be applied to other professions. Although the amount you receive is dependant on the number of kilometres you travel, you are paid a predetermined amount per kilometre. The amount is paid to cover the estimated expenses you will incur in using your car such as petrol and wear and tear on your car. You are not compensated exactly for these expenses. Accordingly, the amount you receive from your employer is an allowance and required to be included in your assessable income. You may be entitled to a deduction for your work related car expenses.

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