Rate per kilometre method of deducting car expenses 5,000 business kilometres or less

I am announcing today the rates at which certain taxpayers will be able to claim income tax deductions for car expenses during the 1998-99 income year. The rates apply to no more than 5,000 business kilometres use for a car during the income year (a taxpayer whose car does travel more than 5,000 business kilometres during the year may elect to use this method because of its simplicity but can only claim for 5,000 kilometres).

The cents per kilometre method allows a taxpayer to claim a deduction for car expenses on a per kilometre basis, instead of by reference to actual car expenses fully substantiated by documentary evidence.

The rates applicable for the 1998-99 income year are set out below. Since the 1986-1987 income year, the rates in the Regulations (formerly in the 1936 Act Regulations) have followed the rates of motor vehicle allowance for the Commonwealth Public Service set out by the Department of Employment, Workplace Relations and Small Business (DEWRSB) (formerly the Department of Industrial Relations). The rates are updated each year. However, the current DEWRSB rates are lower than the previous years rates.

To ensure that taxpayers are not disadvantaged as a result of the lower rates, for the 1998-99 year they are maintained at their 1997-98 level. However, for the 1999-2000 year it is intended to use for tax purposes the current DEWRSB rates, unless those rates subsequently increase. Those rates are also set out below. Accordingly, those persons who pay motor vehicle allowances or reimbursements on or after 1 July 1999 and want to come within the taxation reasonable allowance framework should use those rates.

Taxpayers whose claim for business use of a car does not exceed 5,000 kilometres during the income year ending on 30 June 1999 may claim a deduction equal to the number of business kilometres multiplied by the rate per kilometre as shown for 1998-99 in the schedule.

The 1998-99 rates are also used in calculating the taxable value of a small number of fringe benefits (such as remote area holiday travel) provided in the fringe benefits tax year ending 31 March 1999, and the proposed 1999-2000 rates for fringe benefits provided in the year ending 31 March 2000.

THE RATES FOR THE 1998-1999 INCOME YEAR.

THE RATES FOR THE 1999-2000 INCOME YEAR.

CANBERRA
12 February 1999

Contact Officer:
Penny Farnsworth
Assistant Treasurers Office
(02) 6277 7360

Neil Cossins
Australian Taxation Office
(02) 6216 2608