Income Tax Assessment Act 1997 - Cents per Kilometre Deduction Rate for Car Expenses 2018

Administered by Department of the Treasury

Legislation au F2018L01023 Not in force Legislative Instrument

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Explanatory Statement

 

Income Tax Assessment Act 1997 - Cents per Kilometre Deduction Rate for Car Expenses 2018

 

 

General Outline of Instrument

  1. This instrument is made under subsection 28-25(4) of the Income Tax Assessment Act 1997.
  2. The instrument sets the rate at which work-related car expense deductions may be claimed in an income year when using the cents per kilometre method.
  3. The Commissioner of Taxation has determined the rate to be 68 cents per kilometre for the income year commencing 1 July 2018.
  4. A car is defined in section 995-1(1) of the Income Tax Assessment Act 1997 as a motor vehicle (except a motor cycle or similar vehicle) designed to carry a load of less than one tonne and fewer than nine passengers.
  5. The instrument is a legislative instrument for the purposes of the Legislation Act 2003.
  6. Under subsection 33(3) of the Acts Interpretation Act 1901, where an Act confers a power to make, grant or issue any instrument of a legislative or administrative character (including rules, regulations or by-laws), the power shall be construed as including a power exercisable in the like manner and subject to the like conditions (if any) to repeal, rescind, revoke, amend, or vary any such instrument.

 

Date of effect

7.                  The instrument applies from 1 July 2018.  Subsection 12(2) of the Legislation Act 2003 prohibits the retrospective application of a legislative instrument if it detrimentally affects the rights of any person other than the Commonwealth.  This subsection does not apply as this instrument is beneficial to taxpayers as it allows them to claim a greater deduction than was allowed for previous income years.

 

What is this instrument about

8.                  This instrument sets the rate at which work-related car expense deductions may be claimed in an income year when using the cents per kilometre method.

9.                  This instrument sets the rate at 68 cents per kilometre for the income year commencing 1 July 2018, and this rate remains applicable to subsequent income years until such time as the Commissioner of Taxation determines, having regard to subsection 28-25(5), that it should be varied.

10.              Upon registration this instrument repeals and replaces F2016L01157 and continues to provide the same treatment for the affected class of cases.

 

What is the effect of this instrument

11.              The effect of this instrument is to ensure taxpayers and tax practitioners have certainty about the rate at which work-related car expense deductions may be claimed using the cents per kilometre method.

12.              This instrument provides further certainty by ensuring that the rate remains applicable until the Commissioner of Taxation, having regard to subsection 28-25(5), determines that it should be varied.

 

Compliance cost

13.  Compliance Cost Impact: Minor – there will be no or minimal impacts for both implementation and ongoing compliance costs. The legislative instrument is minor or machinery in nature.

 

Background

14.              In the 2015 Federal Budget the Government announced its intention to modernise the ‘cents per kilometre method’ by replacing three rates based on engine size with one rate set at 66 cents per kilometre to apply for all cars. The Tax and Superannuation Laws Amendment (2015 Measures No. 5) Act 2015 received Royal Assent on 30 November 2015, enacting these changes to the Income Tax Assessment Act 1997.

15.              Subsection 28-25(4) of the Income Tax Assessment Act 1997 enables the Commissioner of Taxation to determine rates of cents per kilometre for cars for an income year.

16.              Subsection 28-25(5) of the Income Tax Assessment Act 1997 requires that the Commissioner of Taxation, when determining the rate, have regard to the average operating costs for the cars to be covered by that rate.

17.              After due consideration, the Commissioner has determined that the rate of 68 cents per kilometre will apply for the income year commencing from 1 July 2018. This instrument sets that rate.

 

Legislative references:

Acts Interpretation Act 1901

Human Rights (Parliamentary Scrutiny) Act 2011
Income Tax Assessment Act 1997
Legislation Act 2003

Tax and Superannuation Laws Amendment (2015 Measures No. 5) Act 2015

 

 


 

Statement of compatibility with Human Rights

This statement is prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

 

Income Tax Assessment Act 1997 - Cents per Kilometre Deduction Rate for Car Expenses 2018

 

This Legislative Instrument is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

 

Overview of the Legislative Instrument

This instrument sets the rate at which work-related car expense deductions may be claimed in an income year when using the cents per kilometre method.

 

Human rights implications

This legislative instrument does not engage any of the applicable rights or freedoms as it simply sets the rate at which work-related car expense deductions may be claimed in an income year when using the cents per kilometre method.

 

Conclusion

This Legislative Instrument is compatible with human rights as it does not raise any human rights issues.

 

Overview

The Income Tax Assessment Act 1997 - Cents per Kilometre Deduction Rate for Car Expenses 2018 legislative instrument, made under the authority of subsection 28-25(4) of the Act, addresses the need for a uniform rate for claiming work-related car expenses using the cents per kilometre method. The instrument was enacted by the Australian Parliament to provide clarity and certainty to taxpayers and tax practitioners regarding the rate at which such deductions can be claimed. The instrument sets the rate at 68 cents per kilometre for the income year commencing 1 July 2018, which is applicable to subsequent years until varied by the Commissioner of Taxation under subsection 28-25(5). This change aims to modernise the previous system of multiple rates based on engine size, simplifying the process and providing a consistent rate for all taxpayers. The instrument is compatible with human rights, as it does not engage any applicable rights or freedoms under the Human Rights (Parliamentary Scrutiny) Act 2011.

Scope and Application

The Income Tax Assessment Act 1997 - Cents per Kilometre Deduction Rate for Car Expenses 2018 sets the rate at which work-related car expense deductions can be claimed in an income year when using the cents per kilometre method. This instrument applies to taxpayers who incur car expenses for work purposes and is effective from 1 July 2018. The rate has been set at 68 cents per kilometre for the specified income year, and it remains applicable to subsequent income years until the Commissioner of Taxation determines that it should be varied. The instrument is made under subsection 28-25(4) of the Income Tax Assessment Act 1997, and it repeals and replaces the previous instrument F2016L01157. The instrument ensures certainty for taxpayers and tax practitioners regarding the rate at which deductions can be claimed, while also taking into consideration the average operating costs for cars when setting the rate.

Key Provisions

The Income Tax Assessment Act 1997 - Cents per Kilometre Deduction Rate for Car Expenses 2018, as set out in the legislative instrument F2018L01023, primarily focuses on establishing the allowable rate for work-related car expense deductions for the income year commencing 1 July 2018. Under section 28-25(4) of the Act, the Commissioner of Taxation has determined that taxpayers can claim a deduction of 68 cents per kilometre for car expenses incurred during this period. This rate applies to all cars used for work-related purposes, as defined in section 995-1(1) of the Act, which excludes motor cycles and vehicles designed to carry more than nine passengers or a load exceeding one tonne. Entities and individuals claiming work-related car expenses using the cents per kilometre method must adhere to the rate specified in the legislative instrument, which is 68 cents per kilometre. The Commissioner of Taxation, in determining this rate, has considered the average operating costs for the cars covered by this rate, as required by section 28-25(5) of the Act. This means that taxpayers must ensure their car expenses are documented and calculated based on this specified rate to ensure compliance with the tax laws. The legislative instrument provides certainty by setting this rate and ensuring it remains applicable until the Commissioner determines otherwise, offering stability to taxpayers and tax practitioners in their financial planning and tax filings. Breach of the requirements set out in this legislative instrument may lead to various consequences. If taxpayers claim car expenses at a rate other than the prescribed 68 cents per kilometre, they may be subject to penalties or audits by the Australian Taxation Office (ATO). In cases of deliberate or negligent underreporting of expenses, the ATO may impose penalties under section 284-15 of the Income Tax Assessment Act 1997, which can include fines or additional tax liabilities. While the legislative instrument itself does not specify maximum penalties, it is important to note that the Act provides for penalties that can include fines up to the greater of $2,220 or 25% of the amount of the underpaid tax, depending on the circumstances of the breach. Additionally, persistent or severe non-compliance could potentially lead to criminal charges under section 284-20 of the Act.

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Sourced from the Federal Register of Legislation at 26 August 2026. For the latest information on Australian Government law please go to https://www.legislation.gov.au.