Income Tax Assessment (Cents per Kilometre Deduction Rate for Car Expenses) Determination 2023

Administered by Department of the Treasury

Legislation au F2023L00767 Not in force Legislative Instrument

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Explanatory Statement

Income Tax Assessment (Cents per Kilometre Deduction Rate for Car Expenses) Determination 2023

 

 

General outline of instrument

  1.                This instrument is made under subsection 28-25(4) of the Income Tax Assessment Act 1997 (the Act).
  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. The Commissioner of Taxation has determined the rate to be 85 cents per kilometre for the income year commencing 1 July 2023 (and subsequent income years, until such time as the instrument is repealed or varied).
  3.                The instrument is a legislative instrument for the purposes of the Legislation Act 2003.
  4.                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

5.                  This instrument commences on 1 July 2023.

 

Effect of this instrument

6.                  This instrument varies the cents per kilometre deduction rate for car expenses to 85 cents per kilometre (the previous rate was 78 cents per kilometre).

7.                  This rate will remain applicable until the Commissioner determines that it should be varied.

8.                  This instrument ensures that 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.

 

Compliance cost assessment

9.                  Compliance cost impact: Minor – There will be no additional regulatory impacts as the instrument is minor and machinery in nature OIA23-04951.

 

Background and methodology

10.              This instrument has been developed to ensure that the rate for claiming work-related car expense deductions using the cents per kilometre method is updated to reflect recent average operating costs for cars. The rate has been updated in accordance with the annual movement of the Private Motoring Subgroup of the consumer price index (CPI), rounded to the nearest whole cent within the year.

11.              The latest Private Motoring Subgroup of the CPI numbers can be obtained from the Australian Bureau Statistics website for the latest CPI release, by downloading Table 7 and looking for the series Index Numbers; Private motoring; Australia; (series ID A2326656J).

12.              Subsection 28-25(4) of the Act enables the Commissioner to determine rates of cents per kilometre for cars (as defined in subsection 995-1(1) of the Act) for an income year.

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

14.              To take into account variation within the year, the average index of the four most recent quarters for which data is available is used.

15.              The indexation factor is the ratio of the average index of the four most recent quarters with that of the previous year.

16.              After applying the indexation factor to the published rate for the 2022–23 income year of 78 cents per kilometre, the Commissioner has determined that the rate of 85 cents per kilometre will apply for the income year commencing from 1 July 2023 (and subsequent income years, until such time as the instrument is repealed or varied).

 

Consultation

17.              For this instrument, broad public consultation was undertaken for a period of 3 weeks to 22 May 2023.

18.              The draft instrument and draft explanatory statement were 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.

19.              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

 


Statement of compatibility with Human Rights

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

 

Income Tax Assessment (Cents per Kilometre Deduction Rate for Car Expenses) Determination 2023

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 (Cents per Kilometre Deduction Rate for Car Expenses) Determination 2023 was enacted to update the rate at which taxpayers can claim deductions for work-related car expenses using the cents per kilometre method. This legislative instrument was developed under the authority of subsection 28-25(4) of the Income Tax Assessment Act 1997 by the Commissioner of Taxation, who has set the rate at 85 cents per kilometre for the income year starting 1 July 2023, reflecting recent average operating costs for cars. The determination was made following an indexation process based on the Private Motoring Subgroup of the consumer price index, and it aims to provide certainty to taxpayers and tax practitioners regarding the allowable deduction rate. The instrument is subject to future variation by the Commissioner if necessary and ensures compliance with the human rights standards as per the Human Rights (Parliamentary Scrutiny) Act 2011.

Scope and Application

The Income Tax Assessment (Cents per Kilometre Deduction Rate for Car Expenses) Determination 2023 applies to individuals and entities claiming work-related car expense deductions under the Income Tax Assessment Act 1997. Specifically, it sets the allowable rate at 85 cents per kilometre for the income year commencing 1 July 2023, applicable to those using the cents per kilometre method to calculate their deductions. This instrument is a legislative instrument under the Legislation Act 2003 and is subject to potential repeal, rescission, revocation, amendment, or variation by the Commissioner of Taxation. The instrument is nationally applicable, covering all taxpayers in Australia. There are no stated exclusions or exemptions, but the rate may be varied by the Commissioner in future years based on updated average operating costs for cars. The instrument ensures taxpayers and tax practitioners have certainty about the applicable rate for claiming work-related car expense deductions.

Key Provisions

The Income Tax Assessment (Cents per Kilometre Deduction Rate for Car Expenses) Determination 2023 (subsection 28-25(4) of the Income Tax Assessment Act 1997) sets the rate for work-related car expense deductions using the cents per kilometre method. For the income year starting on 1 July 2023, the Commissioner of Taxation has set this rate at 85 cents per kilometre. This rate will be applicable until further notice, unless the Commissioner decides to vary it. This legislative instrument is designed to provide taxpayers and tax practitioners with certainty regarding the rate at which work-related car expenses can be claimed. Taxpayers who incur work-related car expenses are required to use this rate when claiming deductions for those expenses using the cents per kilometre method. This means that for each kilometre driven for work purposes, taxpayers can claim a deduction of 85 cents. They must keep accurate records and documentation to substantiate the number of kilometres driven for work purposes, as well as any other expenses incurred. Tax practitioners must also be aware of this rate and ensure that their clients are claiming the correct deduction amount when lodging their tax returns. The Act does not specify any offences or penalties for failing to comply with the requirements outlined in this instrument. However, taxpayers who do not comply with the record-keeping requirements or who make incorrect claims may be subject to penalties under the general provisions of the Income Tax Assessment Act 1997. These penalties may include fines, interest charges, and additional tax assessments. In cases of deliberate or negligent non-compliance, criminal penalties may also apply. It is important for taxpayers and tax practitioners to stay informed about any changes to the rate for work-related car expense deductions, as these changes may have significant impacts on the tax liability of individuals and businesses. By understanding the key provisions of this instrument and the obligations it imposes, taxpayers and tax practitioners can ensure that they are claiming the correct deductions and avoiding any potential penalties or consequences.

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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.