FBT and Eligibility – Cents per km rates

Have you factored in the 2020-21 car expense rates for FBT and Income Tax purposes respectively?

FBT – cents per km rate for motor vehicle (other than a car) applied from 1 April 2020

When an employee uses a motor vehicle other than a car for private use, it gives rise to a residual benefit for FBT purposes. The cents per km method can be used to determine the taxable value of the residual benefits.

A ‘car’ is defined under s136(1) of the FBT Act as ‘a motor vehicle (except a motorcycle or similar vehicle) designed to carry a load of less than 1 tonne and fewer than 9 passengers’. Examples of a motor vehicle other than a car include panel vans and utilities designed to carry a load of one tonne or more.

The Commissioner publishes the cents per km rate annually for motor vehicles using the cents per km method valuing residual benefits. The rates that apply from 1 April 2020 are as follows:

Engine capacityRate per kilometre
0 - 2500cc56 cents
Over 2500cc67 cents
Motorcycles17 cents

Eligibility  – cents per km deduction rate for car expenses from 1 July 2020

The cents per km deduction rate for car expenses is 72 cents (up from 68 cents for the 2019-20 income year) for the income year commencing from 1 July 2020.

Not to be confused with the cents per km rate for FBT purposes, the cents per km deduction rate is used to calculate work-related car expenses for eligible taxpayers.

Employer’s withholding obligations for car allowance payments made to employees

Sometimes employers may pay their employees car allowances (not as part of their salary and wages) to cover the employees’ business-related travel applying the cents per kilometre deduction rate (‘the approved rate’).

The ATO’s website has outlined situations where the employers are required to withhold from the car allowances made to their employees:

  • when the payments are made at a rate at (or below) the approved rate for up to 5,000 kms business travel, there is no requirement to withhold;
  • when the payments are made at a rate at (or below) the approved rate to the number of kilometres in excess of 5,000 kms business travel, the employers are required to withhold an amount from the payments for the excess over 5,000 kms;
  • when the payments are made at a rate above the approved rate for up to 5,000 kms business travel, the employers are required to withhold an amount from the payments in excess of the approved rate.

 

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