Is My Car Allowance Enough?
29 July 2016
Car allowances are something we are asked to compare all the time here at StreetFleet, especially since we posted our article on how employers could establish car allowances for employees (another question we are also asked a lot).
Here at StreetFleet we have seen car allowances range from $8,000 - $30,000 per year across many different positions and industries. It is often difficult to look at a specific car allowance and determine if it is or is not the right amount as it totally depends on the nature of the job. What you as driver need to establish, is that the car allowance you are being given does not disadvantage you over being given a company car.
Here are some areas you should look at:
- What level/value of vehicle are you entitled to? While we’d all like a Ferrari, it may not be too realistic for a door to door salesperson.
- How far are you required to travel per year for work? From home to the office does not count, however actual business usage is important.
- Based on the kms and type of vehicle, how much are your running costs per year? Include Tyres, Insurance, Maintenance, Fuel, Roadside assistance etc.
- How much does your vehicle depreciate each year? You should be effectively reimbursed for the change in value in your vehicle when you are using it for business purposes.
- Based on all of the above, how much tax can you claim back at the end of the financial year against the expenses you have incurred?
As you can see, there are quite a few areas to consider when looking at whether a car allowance is the right amount for your specific role.
One of the easiest ways to cover off all of the above is with a fully maintained Novated Lease, which includes all of the above expenses and allowances as well as the tax deductions up front. It is worth speaking to your employer to see whether they will allow a Novated Lease in conjunction with the car allowance. By packaging a car and it’s running costs pre-tax, you can actually multiply the value of the car allowance without it costing your employer anything additional.
Wanting to know how to calculate your employee's car allowance? Check out our article here.