The employer and employee may agree that the employee is paid a vehicle and/or fuel allowance. Sometimes (eg on farms with their own fuel tank), the employer provides the fuel directly for employees for work use rather than by reimbursement. Some employers and employees agree that the employer will cover or help with ongoing costs such as registration and warrant of fitness.
What is the car allowance of my employer?
While your employer generally provides a car allowance so you are able to purchase a vehicle if you don’t have one, you can also use the sum to maintain or improve your current vehicle. Since the car allowance is a benefit and not a reimbursement for business-related expenses, you don’t need to provide proof of how you spend it.
What does the car allowance scheme mean?
The car allowance scheme provides employees with more freedom of choice over the vehicle they drive, instead of having to use one provided by their workplace. If you receive a car allowance, the amount is normally specified on your work contract and is paid out with your salary.
Do I have to pay tax on my employees'car allowance?
If you are paying your employees a motor vehicle allowance as a part of their salary package this is taxed as a part of their wages. A better way would be for the employee to submit their actual expenses for reimbursement or submit a mileage claim.