SCHADS $1.01 Per Kilometre: Reimbursement, or Taxable Allowance?

The operative clause is clause 20.7 — Travelling, transport and fares. Clause 20.7(a) reads:

"Where an employee is required and authorised by their employer to use their motor vehicle in the course of their duties, the employee is entitled to be reimbursed at the rate of $1.01 per kilometre."

Three conditions are doing work in that sentence, and all three must be met:

• Required and authorised — an employee who chooses to drive when they were not required to, or who was not authorised, is outside the clause.
• Their motor vehicle — this is for the employee's own car, not a company vehicle.
• In the course of their duties — travel between clients during a shift, not the ordinary home-to-work commute.

The rest of clause 20.7 covers related costs: where an employee travels on duty and the employer cannot provide transport, all reasonably incurred fares, meals and accommodation are met by the employer on production of receipts (clause 20.7(b)), capped at the agreed standard (clause 20.7(c)). An employee required to stay away from home overnight is reimbursed reasonable accommodation and meals with proof of the costs (clause 20.7(d)) — the answer to a question we see from providers running camps and overnight trips.

For the reference version — the current rate, what counts as authorised use, and how the allowance shows up in an audit — see our SCHADS travel and vehicle allowance resource.

Here is the part almost nobody has caught up with. The SCHADS rate is $1.01 per kilometre. The ATO cents-per-kilometre rate for the 2026–27 income year is 91 cents per kilometre (an 89-cent base rate plus a temporary one-off 2-cent uplift for 2026–27). For 2025–26 it was 88 cents.

So the award rate exceeds the ATO approved rate by 10 cents per kilometre. That gap is not academic — it is precisely what determines the payroll treatment:

• Up to the approved rate (91c/km for 2026–27) and up to 5,000 business kilometres in the income year, a cents-per-kilometre car expense allowance attracts a varied (nil) withholding rate — you do not withhold PAYG from it.
• Above the approved rate, normal withholding rates apply to the excess.
• Past 5,000 business kilometres, the concession runs out. Withholding then applies to the payment for those extra kilometres, not merely to the 10 cents of excess on them.

Paying the award rate of $1.01/km therefore produces a payment that is split for tax purposes: 91 cents of each kilometre is not withheld from, and 10 cents of each kilometre is. A worker who drives 180km in a fortnight is paid $181.80, of which $18.00 sits above the approved rate and is subject to normal withholding.

Diarise the 5,000 kilometre limit, because community and home care runs go through it. Five thousand business kilometres is roughly 190km a fortnight sustained across a full year — so a worker covering a rural run at 400km a fortnight passes the limit before Christmas, and from that point the neat 91/10 split stops describing their payslip at all. A payroll rule that knows only about the rate and not the limit will quietly under-withhold for the back half of the year. The limit governs tax only: clause 20.7(a) keeps paying $1.01 for every kilometre driven, with no ceiling.

This is why the answer to "has PAYG been deducted correctly from my kilometres?" is so often partially. Seeing some tax against a kilometre line is not automatically an error — seeing tax against the whole line usually is, at least until the worker passes 5,000 business kilometres for the year.

The award says "reimbursed". The ATO looks at substance, not the label your award or payslip uses. The distinction that matters:

• A reimbursement compensates an employee for an actual expense they incurred, usually evidenced by a receipt, for the exact amount. Reimbursements are generally not assessable income to the employee and are not reported as allowances.
• An allowance is a predetermined amount paid to cover an estimated expense, regardless of what was actually spent. A flat cents-per-kilometre payment is an estimate, not a reconciliation of actual fuel, tyres and depreciation — so it behaves as an allowance.

A per-kilometre car payment is calculated by multiplying a set rate by business kilometres travelled. It does not track actual expenditure, which is why it is treated as a car expense allowance rather than a true reimbursement — notwithstanding the award's wording. Clause 20.7(b) and (d) payments, by contrast, are made on production of receipted accounts, which is genuine reimbursement territory.

The practical upshot for payroll: do not let the word "reimbursed" in clause 20.7(a) talk you into treating the kilometre payment as tax-free in full. And do not let the fact that it is an allowance talk you into withholding from all of it.

Under Single Touch Payroll Phase 2, cents-per-kilometre allowances are reported separately rather than folded into gross. Both components are reported: the portion within the ATO rate and business-kilometre limit, and the portion that exceeds it. Lumping the kilometre payment into ordinary earnings is a reporting error even where the dollar total paid to the worker is correct.

If your payroll system has a single "Kilometres Travelled" earnings line with no allowance category attached, that is worth checking before your next STP submission — it is a quiet, systemic mismatch that is easy to fix going forward and tedious to correct retrospectively.

On superannuation: a car expense allowance paid on a per-kilometre basis for business kilometres, up to the approved rate, is generally not ordinary time earnings and so does not attract super. The treatment of the excess above the approved rate is not automatic — check it against the ATO's list of payments that are OTE for your specific arrangement rather than assuming it follows the withholding answer.

This trips up more providers than the tax treatment does, because people assume clause 20.7 answers it. It does not. Clause 20.7 is about money for the vehicle, not about paying for the time spent driving. The SCHADS Award contains no standalone "travel time allowance" clause — searching the award for a provision that says travel between clients is paid time returns nothing.

Whether the driving time is paid turns instead on whether the worker is engaged across that period — which is a broken shift question, not a travel question:

• If the worker finishes with client A at 11:00 and starts with client B at 11:20, that is a continuous engagement with a short gap. The time is worked time.
• If the worker finishes with client A at 11:00 and does not start with client B until 15:00, that unpaid gap is a break — and if it is not a meal break, you are in broken shift territory under clause 25.6, with the allowance under clause 20.12(a) or (b). Check the stream first: clause 25.6 opens by limiting itself to "social and community services employees when undertaking disability services work and home care employees", so a SACS worker who is not doing disability services work has no broken shift allowance to claim however long the gap runs.

So the question a provider asks as "do we have to pay travel time after the lunch break to the next customer's home?" is really two questions: is the gap a break or is the worker still engaged, and if it is a break, does the day now constitute a broken shift attracting $21.81 (one unpaid break) or $28.87 (two unpaid breaks)? The kilometres are reimbursed either way under clause 20.7(a); the time follows the engagement.

• Withholding PAYG from the entire kilometre payment. The portion up to the ATO approved rate should attract a varied (nil) withholding rate. This over-withholds and the worker only recovers it at tax time.
• Withholding nothing at all. Equally wrong at $1.01/km, because 10 cents per kilometre sits above the 2026–27 approved rate of 91 cents.
• Ignoring the 5,000 kilometre limit. The nil-withholding treatment is capped at 5,000 business kilometres per year, and a full-time community worker will pass it. Payroll rules almost always encode the rate and forget the limit.
• Using a stale ATO rate. The approved rate moved from 88 cents (2024–25 and 2025–26) to 91 cents for 2026–27. A payroll rule written last year against 88 cents now splits the payment at the wrong point.
• Paying below $1.01/km. The award rate is a minimum for required and authorised use of the employee's own vehicle. Paying the ATO rate of 91c because it is "the tax rate" underpays the award by 10 cents per kilometre — a genuine underpayment, not a tax election.
• Reimbursing the commute. Clause 20.7(a) covers use "in the course of their duties". Home to first client and last client to home are generally not within it.
• Assuming kilometres answer the travel time question. Paying $1.01/km does not discharge an obligation to pay for time worked, and does not extinguish a broken shift allowance.

Three checks, in order:

1. Rate check — are you paying at least $1.01 per kilometre for required and authorised use of the employee's own car? That is the award floor under clause 20.7(a).
2. Split check — is your payroll withholding only on the amount above 91 cents per kilometre for 2026–27, rather than on all of it or none of it? And does it know when an employee passes 5,000 business kilometres for the year, at which point the split no longer applies?
3. Reporting check — is the payment mapped to a cents-per-kilometre allowance category in STP Phase 2, not merged into gross earnings?

Because the ATO rate changes between income years and the award rate changes each 1 July, these two numbers drift independently. Diarise both. CrossVault's Timesheet Validator checks the award side — that the kilometre rate paid meets clause 20.7(a) and that travel gaps have been correctly classified as broken shifts or continuous engagements — alongside the full SCHADS check set.

If you use your own car between clients and your employer required and authorised it, you should be seeing at least $1.01 per kilometre, shown as its own line rather than buried in your hourly pay. If tax has been taken out of the whole amount, or the rate is below $1.01, both are worth raising. Upload a payslip to our free payslip check and it will verify your rates and allowances against the current SCHADS minimums, line by line.