The 2020/2021 ATO cents per km Rate

Do you know the correct milage cost for your employees driving their own car? The Australian Taxation Office created a guide covering the 2020/2021 financial year.

For work-related mileage incurred from July 1, 2020, the ATO cents per kilometre rate for cars (not including motorcycles or vehicles with a carrying capacity of one tonne or more, or nine or more passengers, such as a utility truck or panel van) is: 

  • $0.72 per kilometre driven for business, up to a maximum of 5000km in one financial year.

Here is the ATO’s announcement of the 2020 mileage rates with a bit more information, where you can learn more about the historic ATO cents per km rates here.

The current ATO mileage rate for business

Starting from the 2020/2021 financial year, the mileage rate for cars (motorcycles or vehicles with a carrying capacity of one tonne or more, or nine or more passengers, such as a utility truck or panel van) using the cents per km method is $0.72 per km driven for business.

Usually, when people talk about the mileage rate or the cents per kilometre rate, they mean the one used for business – that is when you drive your personal vehicle for business purposes and are reimbursed the costs. The ATO sets the standard cents per kilometre rate each year, though if you are an employee the rates offered by your employer may be different.

As an employee, your employer can choose to reimburse you for the costs you incur when you use your vehicle for business. It’s up to your employer to set their rate and the rules for reimbursement, but the ATO’s standard rate is the standard. If you’re paid more per kilometre than the ATO’s standard rate, or if you’re paid a mileage allowance rather than being directly reimbursed for your specific expenses, those payments are considered taxable income.

If you’re self-employed, you have the option of using the ATO’s rate to deduct the costs of using your car for business.

Can I use ATO mileage rates for reimbursement?

If you’re an employee, since the standard rates are optional, your employer can choose to use that rate or an alternative. Check the rates and rules with your employer before calculating reimbursements.

If you’re self-employed, you have a few more options to calculate your mileage deductions. 

Is there an alternative to using the standard mileage rate?

As a self-employed entrepreneur or a business owner, you always have the option to calculate the costs of operating your vehicle for business using either a logbook or, if your business is a company or trust, the actual costs method.

How do I track & record mileage?

Apps are your go-to. By making use of your phone’s GPS, you can easily track all your trips. They also store your information and generally allow you to classify each trip as personal or business, as per the rules set down by the ATO. We’ve got you covered with a simple and easy-to-use app whether you use Android or iOS.

Other alternatives are keeping a paper mileage log or using a spreadsheet like Microsoft Excel or Google Sheets. Whatever you do, be sure to check out which information you need to record for your records to be considered adequate.

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