Car Allowance Vs Company Car Vs Pay Increase

LCollie302 on 19/07/2016 - 22:33
Last edited 19/07/2016 - 22:41

Hello all

I was thinking it was time to replace my car and also considered myself to be due for a pay review from work. 2 birds with one stone i would suggest to be given a company vehicle like others in the company have, whom have similar skills. I have been told "the company is no longer purchasing company vehicle's but this does not rule me out of a car allowance." Just have to jump through some hoops.

My questions are i presume a car allowance is favourable over a pay increase for my employer is this correct and why?
What are the benefits for me over a pay rise
How do i spend a car allowance eg car loan tyres servicing etc and are there tax benefits for me.

Appreciate any feedback

Financial

Comments

  • [Deactivated] on 20/07/2016 - 06:12
    +7

    It is smoke and mirrors! Car allowance is included in your assessable income just like your salary. Doesn't matter what you spend it on. Costs of running your car on company business are allowable deductions whether or not you get a car allowance. That is subject to you being required to use your private car on company business. ATO explains it at Car Expenses

    • bemybubble on 20/07/2016 - 07:05
      • this

      Allowances form part of your assessable income. However some people opt for it as depending on the nature of your work (I.e. Always on the road performing work) and the allowance is designed more to be a direct reimbursement of costs incurred, then no tax is withheld from this allowance. So in that regards some people prefer it that way.

      • coin saver on 20/07/2016 - 09:36

        Allowances are also used by employers to keep your hourly rate down ie: they dont increase if you work extra hours or o/time.If you work a lot of o/time it could be better to increase your hourly rate rather than have an allowance.

        • bemybubble on 20/07/2016 - 09:47

          Somewhat disagree with this. Sometimes allowances are used to put more into the pockets of employees. For example paying a meal allowance as opposed to incorporating it as part of their wage.

        • Collie302 on 20/07/2016 - 19:03

          Good point hadn't considered this view

        • Euphemistic on 21/07/2016 - 08:23

          The less you overall rate the less you'll get in super too.

  • [Deactivated] on 20/07/2016 - 06:17

    Also have a look at Salary Sacrifice for information on salary sacrificing cars and other fringe benefits.

    • Nomic on 20/07/2016 - 09:27
      +2

      I've never really understood Salary Sacrificing a car. Every time I look into it and run the numbers it never works out to be that much of a bargain, especially when FTB and other tax calculations add your Salary Sacrifice on top of your disposable income.

      Not wanting to rant at all, but I think the government really missed an opportunity with the car industry and Salary Sacrifice changes that were being discussed a few years back. They could've made the Salary Sacrifice provisions more generous but limited them to Australian built cars. That would've provided the industry with a boost and a future and also avoided the "direct industry support" that they were so loathe to do. The best Aussie cars would get snapped up on Salary Sacrifice and the duds would linger in showrooms. Win-win-win!

      Back to the OP's question: there isn't really any difference between a car allowance and a pay rise. But IANAA.

  • Euphemistic on 20/07/2016 - 10:19

    Do you need to use your car for work? If the answer is 'not really' just go for the pay rise.

  • Collie302 on 20/07/2016 - 18:24

    Thank you all for the feedback.

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