EXPLANATORY STATEMENT
STATUTORY RULES 1989 NO. 80
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 where the car travels not more than 5,000 kilometres annually in the course of producing the taxpayer’s assessable income.
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 prescribed rates are based on private motor vehicle allowance rates payable to members of the Australian Public Service.
Regulation 1 inserts a new Division - “Division 6 - Rate of deduction for car expenses” - into the Income Tax Regulations. Division 6 contains two regulations.
Regulation 55 provides that the term ‘car’ shall have the same meaning that it has for the substantiation provisions of the Income Tax Assessment Act 1936.
By Regulation 56 the prescribed rates will be as set out in newly inserted Schedule 8. The rate relevant to a particular car will be dependent on the engine capacity of the car and whether or not the car is powered by a rotary engine.
Regulation 2 inserts Schedule 8 into the Regulations. Part I of the Schedule sets the car expense deduction rates for the year of income that commenced on 1 July 1986 and ending on 30 June 1987. Part II sets the rates that apply for the year of income commencing on 1 July 1987 and ending on 30 June 1988.