Commonwealth Numbered Regulations - Explanatory Statements

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EXPLANATORY STATEMENT Select Legislative Instrument 2006 No. 61


Issued by authority of the Minister for Revenue
and Assistant Treasurer

Income Tax Assessment Act 1997

Income Tax Assessment Amendment Regulations 2006 (No. 2)

Section 909‑1 of the Income Tax Assessment Act 1997 (the Act) provides that the Governor-General may make regulations prescribing matters required or permitted by the Act to be prescribed, or necessary or convenient to be prescribed for carrying out or giving effect to the Act.

The purpose of the amending regulations is to insert the 'cents per kilometre' rates for calculating deductions for car expenses for the 2005-06 income year in Part 2 of Schedule 1 to the Income Tax Assessment Regulations 1997 (the Principal Regulations).

Motor vehicle expenses incurred in the course of deriving assessable income or carrying on a business are tax deductible under section 8-1 of the Act.  The taxpayer can calculate a deduction for car expenses using one of four specified methods outlined in Division 28 of the Act.  The 'cents per kilometre' method in section 28-25 is one of the four methods available to taxpayers.  To calculate the deduction under the 'cents per kilometre' method, the number of business kilometres the car travelled during the year of income is multiplied by a specified number of cents.  The cents per kilometre rate is determined in relation to the car's engine capacity and is prescribed in the Principal Regulations.  This method can be used for the first 5,000 business kilometres only.  If a taxpayer wishes to claim more than 5,000 business kilometres, he or she must use one of the other methods outlined in Division 28 of the Act.

The number of cents used in the 'cents per kilometre' method are set out in Part 2 of Schedule 1 to the Principal Regulations.  The rates are revised each year and the ones currently prescribed apply only up to and including the 2004-05 financial year.  Since the 1986‑1987 financial year, the rates in the Regulations have followed the rates of motor vehicle allowance for the Commonwealth Public Service set out by the Department of Employment and Workplace Relations.

The rates for the 2005-06 income year are as follows:



Engine capacity of car not powered by a rotary engine (cubic centimetres)

Engine capacity of car powered by a rotary engine (cubic centimetres)

Rate per kilometre (cents)

Small car

Not exceeding 1600cc

Not exceeding 800cc


Medium car

Exceeding 1600cc but not exceeding 2600cc

Exceeding 800cc but not exceeding 1300cc


Large car

Exceeding 2600cc

Exceeding 1300cc



The Regulations are also relevant for the purposes of the Fringe Benefits Tax Assessment Act 1986 (FBTAA 1986).  The definition of basic car rate in subsection 136(1) of the FBTAA 1986 provides that the rate is the same as that prescribed for the purposes of section 28‑25 of the Act.  'Basic car rate' is used in the calculation of the taxable values of a number of fringe benefits.


The Regulations commenced on the day after they were registered on the Federal Register of Legislative Instruments.

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