This sounds like a volunteer arrangement. A commercial business may not engage a volunteer, only not-for-profit entities may do this. So the business must engage the person legally as a contractor or casual employee. The employer must comply with legal obligations regarding workers compensation insurance, FairWork and PAYG withholding obligations (if any; although in this case, the worker would be earning under the taxable threshold). What if this worker had an accident in his own vehicle, while performing duties for this business?
Remember that it is the onus of the employer to comply with his legal obligations of engaging workers, and to enter into a work arrangement that is legal.
If the “retired” worker doesn’t want to affect his pension, he can check with Department of Human Services as to the amount he can earn without affecting his pension entitlement, and advise the employer accordingly so that he doesn’t earn more than that threshold.
Regarding the payment for fuel, to be classed as a reimbursement, actual expenses incurred must be proved by the worker. Receipts would have to be provided and approved by the business owner as legitimate expenses incurred on behalf of the business. Fringe benefits would not come into this arrangement. It is definitely income to the retiree.
Edited at 18 Aug 2015 03:54 AM GMT