Car allowance tax exemption 2023

REEF’s application to the Australian Taxation Office for an exemption from the requirement for REEF members to deduct tax from award-based car allowances paid to employees has again been granted for the 2022-2023 financial year.

Each year REEF makes an application to the ATO so that REEF members can provide their employees with the relevant award based motor vehicle allowance without deducting tax.

The amounts paid to the employee for car allowances must still be shown on their annual payment summary under the allowances section, yet no tax is to be withheld.

Employees may still request to have tax deducted from their motor vehicle allowance and employers should accommodate such requests.

Many employers mistakenly believe that this exemption is provided automatically with the motor vehicle allowance. This is not the case. Without REEF’s tax variation authorised by the ATO, the motor vehicle allowance is effectively assessable income to the employee and is subject to tax. It is then a matter for the employee to claim a deduction for their motor vehicle expenses in their annual tax return.

A copy of this exemption can be obtained from REEF upon request.

This variation of the tax exemption on car allowances only applies to financial members of REEF!


If you need guidance in applying this exemption to your employees please contact the REEF helpline on [email protected] or 1300 616 170.