Are you withholding enough for car allowances?
Employers need to remember that if they pay staff a car allowance, they need to withhold tax on any amount they pay that is more than 66 cents per kilometre (from July 1, 2015). If they haven’t been doing this, it may be an idea to start now to avoid their employees being saddled with a tax debt.
Even though the 66 cents amount was legislated in September 2015, the amount applies retrospectively from July 1, 2015.
Businesses should also be reminded that they may need to consider pre-existing car allowance arrangements that have remained unchanged for this financial year. Employers may be best advised to enquire with relevant employees whether they would prefer to increase the withholding amount for the remainder of the financial year to cover any possible shortfall.
Of course the government abolished quite a while ago the one-third of actual expenses method and 12% of original value method, leaving the cents per kilometre method (still with a 5,000km cap) and the logbook method (with unlimited kms).
There is no change to the principle that work related car expenses are deductible, and no impact on salary packaged cars. For more on withholding for employee payments, see this ATO web page. And for help and guidance on varying the amounts withheld, see here.
Harper Group Pty Ltd Chartered Accountants Frankston Ph 9770 1547
Disclaimer: All information provided in this article is of a general nature only and is not personal financial or investment advice. Also, changes in legislation may occur frequently. We recommend that our formal advice be obtained before acting on the basis of this information.