Income Tax Assessment Act 1997 - Cents per Kilometre Deduction Rate for Car Expenses 2020

Administered by Department of the Treasury

Legislation au F2020L00676 Not in force Legislative Instrument

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Explanatory Statement

 

Income Tax Assessment Act 1997 - Cents per Kilometre Deduction Rate for Car Expenses 2020

 

 

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 72 cents per kilometre for the income year commencing 1 July 2020.
  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.                  This instrument commences on 1 July 2020

Under section 12(2) of the Legislation Act 2003 this instrument does not adversely affect the rights or liabilities 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 the effect of this instrument

8.                      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.

9.                  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 Impact

10.              Minor – there will be no or minimal impacts for both implementation and ongoing compliance costs. This legislative instrument is minor or machinery in nature.

Background

11.              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.

12.              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.

13.              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.

14.              After due consideration, the Commissioner has determined that the rate of 72 cents per kilometre will apply for the income year commencing from 1 July 2020. This instrument sets that rate.

 

Consultation

15.              For this instrument, broad public consultation was undertaken for a period of 4 weeks to 14 April 2020.

16.              The draft instrument and draft explanatory statement was published to the ATO Legal database. Publication was advertised via the ‘What’s new’ page on that website, and via the ‘Open Consultation’ page on ato.gov.au. Major tax and superannuation publishers and associations monitor these pages and include the details in the daily and weekly alerts and newsletters to their subscribers and members. This ensures advice of the draft is disseminated widely across the tax professional community, and that they are in an informed position to provide comments and feedback.

17.              No comments were received as a result of the consultation
 

 

 

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

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 2020

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 2020 is a legislative instrument made under subsection 28-25(4) of the Income Tax Assessment Act 1997. This instrument addresses the need to modernise the work-related car expense deduction system by replacing the previous three engine-size-based rates with a single rate for all cars. Enacted by the Parliament of Australia, the instrument was introduced to provide taxpayers and tax practitioners with certainty regarding the rate at which work-related car expense deductions can be claimed using the cents per kilometre method. The Commissioner of Taxation has determined that the rate will be 72 cents per kilometre for the income year commencing 1 July 2020, taking into account the average operating costs for cars. This legislative instrument ensures that taxpayers and tax professionals have clarity on the applicable rate for claiming work-related car expenses, thus facilitating compliance and reducing potential disputes.

Scope and Application

The Income Tax Assessment Act 1997 - Cents per Kilometre Deduction Rate for Car Expenses 2020 legislative instrument applies to taxpayers who claim deductions for work-related car expenses using the cents per kilometre method. This encompasses individuals, businesses, and other entities that incur such expenses in the course of their operations. The instrument sets the rate for claiming these deductions at 72 cents per kilometre for the income year commencing 1 July 2020. It applies nationally across Australia and is a legislative instrument under the Legislation Act 2003. The instrument does not exclude any specific entities or industries, but it does pertain specifically to car expenses that meet the definition of a car as outlined in the Income Tax Assessment Act 1997. The Commissioner of Taxation has the authority to vary this rate in future years, subject to the conditions stipulated in the Act. The instrument does not adversely affect the rights or liabilities of any person other than the Commonwealth, and it provides certainty to taxpayers and tax practitioners regarding the allowable deductions for work-related car expenses.

Key Provisions

The Income Tax Assessment Act 1997 - Cents per Kilometre Deduction Rate for Car Expenses 2020 sets out the rate at which work-related car expense deductions can be claimed under the cents per kilometre method (subsection 28-25(4)). For the income year beginning 1 July 2020, the rate is set at 72 cents per kilometre (section 995-1(1)). This rate applies to cars as defined in the Act, excluding motorcycles or similar vehicles and those designed to carry a load of more than one tonne or more than nine passengers (section 995-1(1)). The Act ensures taxpayers and tax practitioners have certainty regarding the allowable deductions for car expenses related to work. The Act imposes specific obligations on taxpayers and the Commissioner of Taxation. Taxpayers must use the set rate to calculate their car expense deductions when using the cents per kilometre method. The Commissioner of Taxation, in determining the rate, must consider the average operating costs for the cars covered by that rate (subsection 28-25(5)). The Act also mandates that the set rate remains applicable until the Commissioner of Taxation, having regard to the relevant subsection, determines it should be varied. There are no specific offences, penalties, or civil/criminal consequences mentioned in the text for breaches of this legislative instrument. However, taxpayers who do not comply with the requirements of the Act in claiming their car expense deductions could face general tax compliance issues, which might include audits, penalties for underpayment of tax, or interest on unpaid amounts. The Commissioner of Taxation can enforce compliance through various means, including notices to taxpayers, audits, and legal action where necessary. It is important for taxpayers to ensure they adhere to the requirements of the Act to avoid any potential compliance issues.

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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.