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Payroll Q&A – PAYGW requirements: Cents per kilometre allowance

Are we required to withhold PAYGW from allowances paid to employees for work related travel and based on the ATO’s recommended cents/km rates? Should the allowances be shown in their payment summaries?

Question

When employees are required to use their own vehicle for work related travel, we pay them an allowance based on the ATO’s recommended cents/km rates – are we required to withhold PAYGW from these allowances? Are these allowances required to be shown on their payment summary?

Answer

The allowance should be shown on the employee’s payment summary. No PAYGW is required if the rate does not exceed the ATO approved rates and total business kilometres does not exceed 5,000 kilometres.

The table below summaries the PAYGW obligations for this type of allowance:

Allowance Type Are you required to withhold? Include on Payment Summary?
Payments made by applying the approved (or a lower) rate to the number of business kilometres travelled up to 5,000 kilometres   No Yes (show total allowance separately in the allowance box with an explanation).
Payments made by applying the approved (or a lower) rate to the number of business kilometres in excess of 5,000 kilometres   Yes (from payments for the excess over 5,000 kilometres) Yes (show total allowance separately in the allowance box with an explanation)
Payments made at a rate above the approved for distances travelled up to 5,000 kilometres   Yes (from the amount which relates to the excess over the approved rate) Yes (show total allowance separately in the allowance box with an explanation)