EXPLANATORY STATEMENT
STATUTORY RULES 1989 NO. 124
ISSUED BY THE AUTHORITY OF THE TREASURER
The purpose of these regulations is to set the rates at which a taxpayer will be entitled to claim income tax deductions on a cents per kilometre basis for car expenses for the year of income commencing on 1 July 1988.
Section 82KX of the Income Tax Assessment Act 1936 enables a taxpayer to elect an arbitrary basis of deduction in relation to a car that is owned or leased by the taxpayer and used for the purpose of producing assessable income, where the number of kilometres travelled for that purpose is not more than 5,000 in a year of income.
The deduction allowable under section 82KX is equal to the number of business kilometres multiplied by the prescribed rate of cents per kilometre applicable to the engine type and size of the car, expressed in cubic centimetres. These regulations prescribe the relevant rates.
The regulations are also used to calculate the taxable value of a number of fringe benefits (such as remote area holiday travel) provided in the fringe benefits tax year ended 31 March 1989.
The prescribed rates are based on the private motor vehicle allowance rates payable to members of the Australian Public Service.
The regulations do not affect the rights of any person (other than the Commonwealth) in a manner prejudicial to that person, nor do they impose any liability on such a person.
Accordingly, the regulations amend Schedule 8 of the Income Tax Regulations by inserting, after Part II, new Part III. The new Part III of the Schedule sets the car expense deduction rates for the year of income commencing on 1 July 1988 and ending on 30 June 1989.
Overview
The Income Tax Assessment Regulations 1989, as amended by Statutory Rule No. 124, were enacted to establish the rates at which taxpayers could claim income tax deductions for car expenses on a cents per kilometre basis for the year beginning 1 July 1988. These regulations were issued under the authority of the Treasurer and are intended to align closely with the private motor vehicle allowance rates provided to members of the Australian Public Service. The Income Tax Assessment Act 1936 provides the legislative basis, enabling taxpayers to elect an arbitrary basis of deduction for car expenses related to the production of assessable income, provided the annual kilometres travelled do not exceed 5,000. The regulations prescribe the relevant rates for determining the allowable deductions, thereby ensuring consistency and fairness in tax deductions for business-related car expenses. Additionally, the regulations impact the calculation of the taxable value of certain fringe benefits provided in the fringe benefits tax year ended 31 March 1989.
Scope and Application
The Statutory Rules 1989 No. 124, issued by the authority of the Treasurer, outline the rates for claiming income tax deductions on a cents per kilometre basis for car expenses under section 82KX of the Income Tax Assessment Act 1936. These regulations apply to taxpayers who own or lease a car used for producing assessable income, with a limitation of up to 5,000 kilometres travelled per year. The allowable deduction is calculated by multiplying the number of business kilometres by a prescribed rate based on the car's engine type and size, expressed in cubic centimetres. These prescribed rates are derived from the private motor vehicle allowance rates payable to members of the Australian Public Service. Furthermore, the regulations are employed to determine the taxable value of certain fringe benefits provided in the fringe benefits tax year ended 31 March 1989. The regulations do not prejudice the rights of any person other than the Commonwealth nor do they impose any liability on such individuals. The rules amend Schedule 8 of the Income Tax Regulations by inserting a new Part III, which sets out the car expense deduction rates for the year commencing on 1 July 1988 and ending on 30 June 1989.
Key Provisions
The main operative sections of these regulations are focused on establishing the rates for income tax deductions on car expenses for the year commencing 1 July 1988 (section 82KX). Section 82KX of the Income Tax Assessment Act 1936 allows taxpayers to claim deductions on a cents per kilometre basis for cars used for producing assessable income, provided the car does not exceed 5,000 kilometres in a year. The regulations specify these rates based on the engine type and size of the car, measured in cubic centimetres. The rates are aligned with the private motor vehicle allowance rates provided to members of the Australian Public Service.
The regulations impose specific obligations on taxpayers who choose to use the cents per kilometre method for claiming deductions. Taxpayers must accurately calculate their business kilometres travelled and multiply this by the prescribed rate applicable to their car's engine type and size. The regulations are designed to ensure that taxpayers can claim a fair and consistent deduction that reflects the actual usage of their vehicle for business purposes. Furthermore, these rates are also used to determine the taxable value of certain fringe benefits provided in the fringe benefits tax year ended 31 March 1989.
There are no direct offences, penalties, or civil/criminal consequences specified in these regulations for non-compliance with the prescribed rates. However, taxpayers must ensure that they accurately calculate their deductions and comply with all relevant income tax laws. Failure to do so could result in penalties under the broader provisions of the Income Tax Assessment Act 1936, including fines or additional tax liabilities. It is essential for taxpayers to maintain accurate records and calculations to avoid potential discrepancies or audits by the Australian Taxation Office.