Need some info. Car Allowance in wages.

Hi,

My partner has been given a $140pw car allowance through her work since she has to use her own car a bit. Now we are new to this and were told that the allowance must be spent on the car (proven with reciepts) otherwise it has to be paid back at tax time.

So what is the in's and out's of this. Do we simply just keep records of our maintenance, repairs, insurances, rego and petrol? If we cannot satisfy the $140pw, are we expected to put money aside for tax time, or should we just make sure we spend it on the car somehow?

Sorry it's not on the subject of property.

Thanks,
Andrew.
 
Your partner will declare the $140 per week as income. It will probably be on the group certificate.

Your partner will then claim deductions for car expenses by using one of the formulae listed on the ATO website.
Marg
 
Hi,
If you don't think you will spend it, then she can just ask her payroll person to make sure its taxed at normal salary rates. They should really be doing this anyway unless you have completed an Income Tax Withdrawal Variation (ITWV) form.
Then at tax time, you can use either the receipts or the other methods of claiming car (depreciation/ kms etc) to get a tax refund.

If you have interest/ lease payments, you can complete the ITWV form, same as for IPs, to have less tax taken out of the car allowance.

Whichever way you decide to go, she should also keep a logbook for 3 months, which shows how much of the car use is business and how much is personal. The trip to and from work is generally personal unless you are carrying equipment, or are going somewhere work related on your way home.... key ways to maximise your work kms!! She may only be able to claim a percentage of her car expenses, depending upon how much she drives for work. The percentage is determined by the logbook, so make sure its completed and filled in correctly.

At our workplace, we all bought new cars about the same time, and end up doing logbooks at about the same time. During this 3 month period, its amazing how many rural visits we need to do, how many customers who are close to our house we need to see at 4pm etc. But cause we are all doing teh logbook at the same time, we fight over who will drive to see customers. Its our busiest time of the year!

Pen
 
Thanks for the help.

Just did some figures:
Fuel: 3640 (Based on $70 a week, barely uses $40 at the moment!)
Insurance: 900
Servicing: 1250
Rego: 700
New Tyres: 500

Total = $6990
Allowance = $7280 ($290 Difference)

So am I right in saying that the car allowance, because its a FBT(?) gets taxed at a different rate?

As per the logbook, I will get one right away for her.

Thanks again,
Andrew.
 
Don't forget depreciation - if she has a newish car that could be quite a high expense also. So if she uses her car mostly for work i.e. the business use is a high % she could in fact end up with expenses > income based on your figures provided, which will benefit her in regards to her tax refund (obviously not your out of pocket bottom line). But if income > expenses then no, it doesn't get taxed differently in her return. It just goes in as normal income (it will be on her group certificate as an allowance) and comes out as a normal deduction for motor vehicle expenses. The result will be either income taxable or a deduction.
 
The car is a 2005 Holden Astra. She drives 2-3kms to work, and anything we need is in that distance. Obviously we do a little driving on the weekends but over 60% usage is definitly business.

Thanks for your reply biggles,
Andrew.
 
The car is a 2005 Holden Astra. She drives 2-3kms to work, and anything we need is in that distance. Obviously we do a little driving on the weekends but over 60% usage is definitly business.

Thanks for your reply biggles,
Andrew.

Just keep in mind that the trip to and from home is classed as "personal" and not business use, unless she is carrying equipment or doing business tasks on the way to/ from home.
Pen
 
Car allowance is not FBT. The car allowance is considered income.

For the person receiving the FBT there is no tax paid by them on that. The tax is paid by the employer. Though the FBT can effect tax offsets like the low income tax offset.
 
Thanks for the help.

Just did some figures:
Fuel: 3640 (Based on $70 a week, barely uses $40 at the moment!)
Insurance: 900
Servicing: 1250
Rego: 700
New Tyres: 500

Total = $6990
Allowance = $7280 ($290 Difference)

So am I right in saying that the car allowance, because its a FBT(?) gets taxed at a different rate?

As per the logbook, I will get one right away for her.

Thanks again,
Andrew.

Also, will only be able to claim 60% of the total stated if only 60% is business use and other 40% is personal, as would be the same for depreciation.

So therefore about a $3000 difference from your numbers, not $290 which you would need to try and use up through depreciataion, tolls, parking.

Any money not used would be taxable income, which IMHO it is better to have employer taxing this car allowance as income in your normal pay cycle and if you use up your allowance, you would get refund at end of financial year. At least you won't have to pay tax back.
 
So the total amount would roughly be $3900 after claiming on all car expenses + depreciation, which means we would have $3400 of taxable income?

I'ld much rather we get taxed on the allowance as normal income if thats going to work out better.

We'll have to book in to see an accountant I think.
 
Don't see why you'd need an accountant. Seems pretty straight forward to me.

Don't forget you can use the much simpler method of claiming at the very generous rate of approx. 70-75c/km (depending on engine size) through the ATO for up to a maximum 5,000km per year. If you're not going to be able to claim much more than $3,500 by the logbook method it might not be worth the bother of keeping all the records.
 
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