Our organisation pays a lump sum car allowance to certain employees in relation to cars provided by the employer to the employee. Employees use these cars for business and private purposes. Are these allowances subject to PAYG withholding and how should they be shown for Payment Summary reporting purposes.
Section 51AF ITAA 1936 provides that this type of allowance (where a car fringe benefit is being provided by employer) does not create a tax deduction for the employee.
As such, it needs to be included as income on the employees PAYG Summary.
As to where it appears – the following ATO guidance suggests it is required to be rolled up into gross payment received by the employee and shown as such on the Payment Summary (as opposed to being shown separately as an allowance). Source: https://www.ato.gov.au/Business/PAYG-withholding/Payments-you-need-to-withhold-from/Payments-to-employees/Allowances-and-reimbursements/Withholding-for-allowances/
See the extract from ATO website below:
|Allowance type||Examples of allowances||Are you required to withhold?||Include on payment summary? If so, how?||Does super guarantee apply?|
|Allowances for non-deductible expenses||Part-day travel (no overnight absence from employee’s ordinary place of residence)
Meals (not award overtime meal allowance or overnight travel allowance)
Motor vehicle for non-deductible travel – eg home to work, including cents per kilometre payments
|Yes||Yes (include total allowance in gross payment)||Yes|