Company Car Allowance

With the increasing popularity of a car allowance, employees need to know the “ins and outs” of how a Company Car Allowance works.

The first step is to understand all the Company Car Allowance “lingo” and terminology

Company Car Allowance

A Company Car Allowance is an allocation of an amount your employer gives you to maintain a car. Any employee requiring a car to fulfill their position is eligible to receive a Company Car Allowance. Upon application to the ATO, an employee can gain authority to have their employer deduct from Pre-tax salary an amount sufficient to maintain a car, this amount is called a Company Car Allowance.


Company Car Allowance Finance Options

Finance options for use of a Company Car Allowance are normally a Commercial Hire Purchase or a Novated Lease.

Business Use

You can claim the business use percentage of all your car expenses. To work out your business use percentage, use the details from your logbook and odometer records. From your records, work out the total kilometres you travelled. Work out how many were business kilometres. Divide this number by the total number of kilometres travelled. Multiply the answer by 100.

Log Book

Using the “logbook” method, you work out the business use percentage of your car. You can then claim this percentage of each car expense. Car expenses do not include capital costs such as the purchase price of your car or improvements to it. You must keep, a logbook, odometer records, and written evidence for all your car expenses except fuel and oil costs.

National Fleet Discount

Motor vehicle manufacturers provide a discount to purchasers subject to meeting their qualifying criteria. The size of the discount will vary according to the make and model of the vehicle.

Pre-Tax Income

Pre-tax income are funds that come from your salary before it is taxed.

Balloon Payment

Refers to the estimated value of the car at the end of the given lease period.

Tax Variation

Employees must complete the Australian Taxation Office (ATO) PAYG income tax withholding variation (ITWV) form, which authorises the employer to vary the amount of income tax paid to create a Pre-tax allowance sufficient to finance and maintain the car of your choice. Employees who use their car for business related purposes are in most cases eligible providing they complete the ITWV form.

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