Explanatory Statement

Issued by the Authority of the Assistant Treasurer

Explanatory Statement

Income Tax Assessment Act 1997

Income Tax Assessment Amendment Regulations 2000 (No. 1)

The Governor-General may make regulations under section 909-1 of the Income Tax Assessment Act 1997 (the Act) for the purposes of that Act.

Purpose

The purpose of the regulations is to insert into the Income Tax Assessment Regulations 1997, specifically regulation 28-25.01, for the purposes of Division 28 of the Act, the 'cents per kilometre' rates for use in calculating a deduction for car expenses for the 1999-2000 income year.

The regulations are also used to calculate the taxable value of a number of fringe benefits that relate to motor vehicles (such as remote area holiday travel) provided in the fringe benefits tax year ending 31 March 2000.

This is achieved by the employer using the rates in the proposed regulations for the purposes of determining the amount of reimbursement to the employee where, for example, the employee has used his or her own vehicle for the holiday travel.

Background

Division 28 of the Act outlines four methods for taxpayers to calculate the amount of deduction they can claim for car expenses. If a taxpayer does not wish to claim for more than the first 5,000 kms of the income-producing use of a car owned or leased by the taxpayer, he or she can elect to claim a deduction for car expenses using the 'cents per kilometre' method out in section 28-25 of the Act. That is, the deduction is calculated by multiplying the number of business kilometres by the prescribed rate applicable to the car's engine capacity.

If a taxpayer wishes to claim for more than 5,000 kms of the income-producing use of a car owned or leased by the taxpayer, he or she must use one of the other three methods outlined in Division 28 of the Act.

Since the 1986-1987 income year, the rates in the Income Tax Regulations 1997 (formerly in the Income Tax Regulations 1936) 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 (formerly the Department of Industrial Relations). The rates are reviewed each year.

The new rates for the 1999/2000 income year are as follows:

The regulations commenced on gazettal.