Issued by authority of the Assistant Treasurer

Income Tax Assessment Act 1997

Income Tax Assessment Amendment Regulations 2010 (No. 4)

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 2008-09 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. Division 28 of the Act outlines the rules for calculating deductions for car expenses. The taxpayer can calculate a deduction for car expenses using one of four specified methods. 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 for more than 5,000 business kilometres, he or she must use one of the other methods outlined in Division 28 of the Act.

The cents per kilometre rates are updated every year by regulation. The rates are revised each year and the rates currently prescribed apply for the 2008-09 financial year. The rates in the Principal Regulations are based on the rates of motor vehicle allowance calculated by the Department of Education, Employment, and Workplace Relations for general use of the Australian Public Service and increase when there is an upward movement of the Private Motoring Subgroup (series ID A2326656J) within the Consumer Price Index (ABS catalogue number 6401.0).

The proposed rates for the 2009-10 income year would not change from the 2008‑09 rates and are as follows:

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.

No consultation was undertaken on the Regulations. However, the process for updating the cents per kilometre rates is well established and is not controversial. No taxpayers are adversely affected by changes to the cents per kilometre rates.

The Regulations would commence on the day after they are registered on the Federal Register of Legislative Instruments.