Car allowance

Does your employer give you the option between choosing a company car and a car allowance?

Are you unsure on what option to choose?

Both options have some advantages and disadvantages, but the key is to understand what both options entail and acknowledge what option would be best suited for you.

A company car is a vehicle that the business owns and is then provided to their employees for use. Depending on the employer, a company car can be used for only business use or for both business and personal use. From both an employers and employees point of view, a company car can result is some distinct benefits.

The advantages and disadvantages of a company car are following:



  • For employees, a company car can eliminate the need to purchase a vehicle and
    maintain it (fuel, service and maintenance, tyres and insurance) for business
  • Restrictions on the choice of the vehicle and the amount of allowed personal use.
  • For employers, a company car can be promoted by the business as a perk reserved for
    high-achieving employees.
  • The car has to be returned when the employee leaves the company.

A car allowance is a set amount of money that a business adds to an employee’s incomes to cover the cost of a car or car-related costs. Depending of the employer, a car allowance may pay for the full price of vehicle or, often, a car allowance is provided to only cover the cost of fuel, service and maintenance. A business usually provides the car-related costs car allowance to an employee that uses their personal vehicle for business purposes.

The advantages and disadvantages of a car allowance are following:



  • You are able to continue to use the vehicle you already own.
  • You will be required to maintain records in order to claim a tax deduction against your car allowance.*
  • You are able to control the amount you spend on acquiring and running your vehicle.
  • Car allowances are fixed whereas running costs are variable.


*If you chose to package your vehicle through a Novated Lease, Boost Salary Packaging will look after the administration for you. A Novated Lease could be more cost effective for you than a car allowance due to GST savings, individuals cannot claim.

If a car allowance seems like the best option for you, further consideration should be made in the benefits of a Novated Lease. As a part of our of our boostDrive service, at Boost Salary we offer a strong buying power. We can help our clients find the car that is best suited to their needs and handle all the communication with the car dealership. We can also organise fuel, maintenance, tyres, registration and insurance to be paid from the client’s pre-tax salary and can organise and handle all of their paperwork. We can assist the employee in maximising the benefit of their car allowance. Ensuring that they obtain the vehicle they want and optimise the benefits of the car allowance facility and get the most out of a car allowance.