REEF’s application to the Australian Tax Office for an exemption from the requirement for members to deduct tax from award-based car allowances paid to employees has again been granted for the 2021-2022 financial year.
This is an application REEF makes each year to the ATO so that members can provide their employees with the relevant award-based car allowance without deducting tax.
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 allowance is provided automatically without the deduction of tax. This is not the case. Without REEF’s variation authorised by the ATO, the car allowance is effectively assessable income to the employee and subject to tax. It is then a matter for each employee to claim a deduction for their actual motor vehicle expenses in their annual tax return.
Importantly, this variation only applies to financial members of REEF. Agencies that are not members of REEF are unable to rely on this variation.