For business use of staff’s private motor vehicles, our business pays motor vehicle reimbursement by the Australian Tax Office (ATO) cents/km method. We only have a handful of staff who submit requests for this, as most claim through their personal tax as a deduction. As employers, are we obligated to process reimbursement in this way if employees submit a request for it? Or can we make a determination as company policy that we will no longer process motor vehicle reimbursement, and request that staff process through their own tax returns in future?
Generally, employers are not obligated to reimburse employees for motor vehicle expenses unless one of the following requires them to:
- modern award;
- enterprise agreement;
- employment contract; or
- company policy.
If the obligation to reimburse motor vehicle expenses is contained in an applicable instrument, you cannot agree to less beneficial provision. However, you can agree with the employee when the obligation arises, e.g. you could provide that it doesn’t apply when the employee elects to claim the expense as a personal tax deduction.