For STP reporting purposes, motor vehicle allowances are categorised into two different fields, dependent on the purpose of the allowance.
Motor Vehicle Allowance and PAYG
In relation to motor vehicle allowances, the ATO states that you are required to withhold from the allowances listed in the following table.
Source: ATO website
On the subject of the motor vehicle allowances, we are often asked, “our accountant has advised that we are not to withhold PAYG – is this correct?”
As shown in the above table and on the ATO website, this is not correct. An employer is required to withhold PAYG from motor vehicle allowance payments (unless the employer has received a withholding variation directly from the ATO to alter the amount of PAYG withheld).