ATO Mileage Rates 2024: Everything You Need To Know
Samson Kiarie
Last update on:
July 8, 2024 11:12 AM
Published on:
If your employees use their personal vehicles for business purposes, they must be compensated for expenses incurred during work-related trips. When reimbursing employees, payments must be made according to the guidelines and rates set by the Australian Taxation Office (ATO).
In this guide, we'll discuss everything you need to know about the ATO mileage rate. We'll highlight the current ATO mileage rates, requirements for reimbursement, and the pros and cons associated with each reimbursement method. You will also learn which vehicles are eligible for the cent per kilometer rate and when employee reimbursements are tax deductible.
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Learn how Timeero can help you streamline mileage reimbursement and stay compliant.
Before we explore various mileage and vehicle expense reimbursement methods, let's explore the general ATO guidelines. In this section, we'll discuss what is considered reimbursable mileage, eligible vehicles, and the latest ATO mileage rates.
What Travel Can Be Reimbursed?
When it comes to mileage reimbursement, business mileage is the only approved travel that employees can be compensated for. According to the ATO, business mileage refers to kilometers covered on work-related trips.
Some of the trips that can be reimbursed as business mileage include:
Traveling to customer locations (ex: field technicians, sales reps, delivery drivers, real estate agents)
Trips between jobs or work sites
Driving to business meetings or conferences held outside your typical workplace
Trips to pick up supplies or run errands for the business
Traveling from home to a temporary workplace if your regular job is elsewhere
Trips from the regular workplace for a mandatory training course
Typically, the kilometers traveled between the employee's home and workplace — commuting mileage — don't count as business mileage. Instead, commuting mileage is regarded as personal mileage and isn't reimbursed.
Type of Vehicles Eligible For Reimbursement
According to the Australian Taxation Office, a car is any motor vehicle that carries fewer than nine passengers and less than one ton of load. The definition applies to electric or hybrid motor vehicles, provided they meet the aforementioned requirements.
Vehicles that don't meet the definition of a car are regarded as "other vehicles," which include:
Motorcycles
Minivans carrying more than nine or more passengers
Ute or panel van carrying more than one tonne of load
The type of vehicle your employees use for business determines the reimbursement method that should be used. If your employees use "other vehicles," you can't reimburse them through the cent per kilometer or logbook method. Instead, you compensate these employees for work-related expenses using the actual expense method.
ATO Mileage Rates
The ATO reviews the cents per kilometer reimbursement rate for employees at the start of each income or tax year (usually around July 1). The reimbursement rate covers expenses associated with operating a car, including depreciation. This means that if you compensate employees through the cent per kilometer method, they can't make another claim for the car's calculated depreciation.
Below are ATO rates over the years:
Employers can reimburse employees at other agreed upon rates, which can be lower or higher than the ATO rates. However, if you pay employees more than the ATO rate, the excess amount is taxable income.
ATO Mileage Reimbursement Methods
The ATO prescribes two primary reimbursement methods:
cent per kilometer method
logbook method
In this section, we'll discuss how these methods work and their requirements. We’ll also highlight the actual expense method for businesses that want to reimburse employees who use "other vehicles" for work-related trips.
Here’s a summary of the three reimbursement methods:
Cent Per Kilometer Method
With this method, business owners reimburse employees for business travel on a cent rate per kilometer rate. To compute an employee's reimbursement, is multiply their business mileage by the current ATO rate. The cent per kilometer method:
Applies to kilometers traveled for business using a personal car that they own (including leased and hired cars under any hire-to-purchase agreement).
Permits businesses to reimburse employees for a maximum of 5,000 kilometers per car each year. If employees travel more than 5,000 kilometers, you can use the logbook method to compensate for excess business mileage.
Doesn't require employees to show evidence of how many kilometers they traveled for business. However, the ATO may request business owners to show how they calculated business mileage.
Logbook Method
With the logbook method, employees keep a detailed logbook, including receipts, and other records of car expenses. Business owners use these records to calculate the deductible portion of car expenses.
Despite its complexity, the logbook method offers greater flexibility because it doesn't have a distance cap. Employees can claim compensation for the business portion of car expenses regardless of the distance covered — even if they travel over 5,000 kilometers per year.
Like the cent per kilometer method, the logbook method applies to business use of personal cars. Employee logbooks must meet the following requirements:
Cover at least 12 continuous weeks and broadly represent their travels.
Include the purpose and destination of each trip, the odometer reading at the start and end of the trip, and total kilometers traveled during the logbook period.
Contain odometer readings for the start and end of the logbook period.
Electronic and manual logbooks are valid for five years after the end of the latest financial year. However, if an employee changes jobs or relocates, and their logbook is no longer representative of their travels, the ATO allows the employee to use a new 12-week logbook.
Additionally, if an employee has two or more personal cars, they must keep a logbook for each car and ensure the logbooks cover the same period. Keep in mind, employees can't claim the car's purchase price, however, they can claim capital costs such as depreciation.
How to Calculate Deductible Mileage For Logbook Method
Calculate the total distance traveled, including business and personal kilometers, during the logbook period.
Next, calculate the distance covered on allowable work-related trips during the logbook period.
Divide business kilometers by total kilometers, then multiply by 100 to get the business use percentage.
Calculate the total expenses of operating a car, including fuel, maintenance, parking, car washes, and tolls.
Multiply the business use percentage by total car expenses to get the employee's work-related car expenses.
Actual Cost Method
As mentioned, the cent per kilometer and logbook methods apply to employees using personal cars for business-related trips. If your employees use "other vehicles," such as motorcycles, utes, and minivans, you can use the actual cost method to reimburse them for travel expenses.
This method works for:
Companies or trusts
Sole traders and partnerships where employees use "other vehicles”
The actual cost method relies heavily on receipts, which means employees must keep records and other written evidence to substantiate their claims. They must record fuel, vehicle maintenance, tolls, car washes, and parking fees, amongst other business travel expenses.
Employees can only claim reimbursement for actual expenses incurred during business use of the vehicle. For this reason, employees must keep journal or diary records to separate business trips from personal trips.
If you compensate employees using the actual cost method, they are entitled to a deduction for capital expense claims, such as the purchase price of a vehicle.
Is Mileage Reimbursement Taxable in Australia?
Taxation on mileage reimbursement depends on the agreed mileage rates. If you reimburse employees at or under the current ATO mileage rate, the reimbursement is considered non-taxable income. On the other hand, if you reimburse employees above the current mileage rate, they must pay income tax on the excess amount.
Keep in mind that expenses incurred when using a ute van to ferry load aren't automatically tax deductible. Employees who use the ute for personal and business purposes can only claim the business portion of motor vehicle expenses. The personal use portion isn't tax deductible.
Timeero: The Best Mileage Tracking App For Australian Businesses
While mileage reimbursement laws in Australia don't require employers to keep mileage records, using the best mileage tracking app can be beneficial in many ways.
Keeping accurate records is an important part of the reimbursement process. Timeero allows you to easily access reports if the ATO requires you to demonstrate how you calculated business kilometers. Accurate mileage logs also enable you to reimburse employees fairly, which boosts morale and improves productivity.
Below, we'll highlight the top benefits of using Timeero to track business kilometers in Australia.
No Hefty Upfront Investment
The Timeero mileage tracking app works flawlessly on Android and iOS devices, so there is no need to invest in expensive gadgets to track employee mileage. Simply ask your employees to install the Timeero mobile app on their devices to begin tracking mileage.
The Timeero mobile app works flawlessly on Android and iOS smartphones.
The cloud-based software is also budget-friendly. With no base fees, and a monthly cost as low as $4 per employee, you have all the tools you need to start tracking mileage. Start a 14-day free trial (no credit card is required) to get a first-hand feel for Timeero’s mileage tracking capabilities.
Easy Set Up and Navigation
Timeero is designed to be easy to navigate for all users, including the less tech-savvy. Setting up the app to track mileage accurately is a breeze for small business owners.
We designed Timeero with Australian businesses in mind. Since ATO provides mileage rates per kilometers, you must configure the app to track mileage in kilometers. To enable Timeero to track mileage in kilometers, simply toggle the "show mileage in kilometers" button within the company settings menu.
Easily configure Timeero to track mileage in kilometers.
Timeero also enables business owners to define the minimum speed threshold, cost per kilometer, and activate the commute mileage feature. Configuring these settings is relatively easy, but if you need a helping hand, our five-star customer support is readily available.
Quickly update the minimum speed threshold and the cent per km rate.
Employees don't need to lift a finger to track mileage. As soon as workers clock in, Timeero identifies their GPS location and begins tracking mileage as soon as an employee exceeds the minimum speed threshold.
Accurate Mileage Tracking
Timeero creates accurate mileage logs that include every detail you need to prove how you calculated business kilometers. Each mileage log shows the total number of kilometers traveled, trip dates, as well as the start/end location for the trip.
In addition, Timeero has multiple features to make sure mileage logs are accurate and compliant with ATO requirements. Setting a minimum speed threshold allows Timeero to track kilometers when the employee is driving. The app won't log any kilometers if the vehicle is stationary or the field employee is walking.
Only work-related mileage can be reimbursed according to the ATO. Timeero is designed to only track mileage when an employee is clocked in. This means the app only tracks business kilometers, eliminating the task of trip classification.
According to the ATO, commuting isn’t considered business mileage. Timeero’s “Commute Mileage” feature automatically deducts commute mileage from daily travel, ensuring the mileage log contains purely business kilometers.
Timeero automatically deducts an employee's commute mileage for accurate record keeping.
Additionally, Timeero is a reliable offline GPS mileage tracker. When field employees travel outside cellular range or lose internet connection for any reason, Timeero continues to track mileage without a hitch. The app stores the data locally on the employee's device and syncs it to the company's cloud once the device is reconnected to the internet.
No Manual Calculation of Reimbursement
Once Timeero tracks employee mileage, it automatically calculates employee reimbursement based on the defined cent per kilometer rate.
To streamline reimbursement at the end of the pay period, or produce the necessary figures during tax season, Timeero allows you to easily generate customizable reports.
Timeero integrates with popular payroll software, such as QuickBooks Online, ADP, Xero Australia, and Gusto. Timeero’s integration capabilities allow you to export payroll reports for faster and more effective reimbursement.
Time tracking: Timeero helps you track every aspect of employee time, including regular work hours, overtime/double-time, and break time. The app also uses geofencing and facial recognition features to curb time theft.
Real-time location tracking: Timeero allows you to track the real-time location of field employees to enhance security and encourage accountability. With Timeero’s route replay feature, you can recreate the route an employee traveled during their shift.
Segmented tracking: This feature is ideal for sales reps, field technicians, delivery drivers, and other employees who make multi-stop trips.. With this feature, Timeero segments an employee's trip based on the stops, allowing you to determine how much time they spent at each location.
Timeero’s segmented tracking helps you determine how much time an employee spends at each location.
Employee scheduling: Timeero's drag-and-drop scheduler makes it easy to schedule employees. Employees are given the ability to accept or reject shifts which minimizes potential scheduling conflicts.
Streamline Mileage Reimbursement For Australian Employees
To maintain compliance and issue accurate reimbursement, it’s important to have an understanding of the mileage reimbursement laws in Australia. Our guide sheds light on various ATO requirements to help you reimburse employees fairly.
While the ATO doesn't require businesses to keep mileage records it may require you to prove how you calculated the business miles. For this reason, we recommend using a reliable mileage tracking app, such as Timeero. Our automatic mileage tracker uses unique technologies to log business kilometers and compute reimbursement automatically, saving managers hours of manual calculation.
Start a 14-day free trial today to test out Timeero, risk-free. You can also book a free consultation call to learn how to customize Timeero to meet your unique business needs.
ATO Mileage Rate: FAQs
What Is the Mileage Rate in Australia for 2024?
The ATO mileage rate in Australia for 2024 is 85 cents per kilometer.
What Types of Vehicles Are Eligible for the ATO per Km Rate?
According to the ATO, only cars are eligible for the per-kilometer rate. A car is any motor vehicle carrying less than nine passengers and a load of less than one ton.
Is There a Maximum Distance I Can Claim Using the ATO per Km Rate?
Yes. Employees can only claim reimbursement for up to 5,000 kilometers per car each year.
What if I Use a Motorbike or a Van for Work-Related Travel?
Employees using motorbikes and vans can claim compensation for work-related travel using the actual expense method.
Eliminate Mileage Guesswork. Get Precise Reimbursements, Effortlessly.
Samson is a mathematician turned content marketer specializing in SaaS and Tech content. He focuses on the practical aspects of software systems while keeping abreast of the industry’s cutting-edge principles to create informative and engaging content. When he’s not writing, Samson spends time playing or watching soccer.
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