Suitable for: Employees who receive allowances from their employer
Tax Difficulty: Easy
Time to read: 2-3 minutes
Tax Focus: Income Tax Returns
Allowances and other earnings in your income tax return
As an employee, you may receive allowances from your employer throughout the tax year to cover the costs of certain work-related expenses. Unlike reimbursements where you are directly compensated for expenses, allowances are pre-arranged and involve your employer paying you a given amount to cover an estimated value of expenses throughout the year.
Allowances are generally assessable income to you as an individual and need to be reported on your annual tax return - whereas reimbursements do not need to be reported. You may also receive other sorts of earnings that are not included in your usual salary, and this should also be included in your tax return.
In this Help Centre article, we’ll discuss certain types of allowances and earnings, and how they can be accounted for on the Airtax tax return.
What is an allowance?
An allowance is separate to your usual salary income and may be paid to you for a number of reasons, including:
- Car travel and transport allowances
- Award transport payments
- Tool, clothing, and laundry allowances
- Dirt, height, site, first aid, and risk allowances: for example, an allowance for the heightened danger of your work environment
- Meal and entertainment allowances
When do I need to record allowances on my tax return?
You should record all allowances you receive on your tax return. However, there are certain exceptions for travel and meal allowances paid under an industrial law, award or agreement.
You should NOT show this type of allowance if all of the following conditions apply:
- You spent the whole amount on deductible expenses
- It was not shown on your payment summary. NOTE: for the purposes of the Airtax tax return, your payment summary information should be pre populated through the ATO integration. Therefore, if you can’t see any information about certain allowances on your Airtax tax return, it may mean that you do not need to include them.
- It does not exceed the Commissioner’s reasonable allowance amount.
NOTE: you can’t claim a deduction on your tax return for expenses that you paid for with an allowance from your employer.
How do I record allowances on my Airtax tax return?
This section should be prefilled for you when you arrive at it, however, if you need to manually complete this section, you can refer to your payment summary from the employer who paid you the allowance.
Where you can get more help:
- Feel free to search for other topics in the Help Centre
- If interested, consider using our Business Assist service to discuss with a qualified Tax Specialist about your BAS (recommended for first time users)
This document merely provides a broad outline of the subject and is necessarily general in nature. If you require specific advice, which is tailored to your specific circumstances, please do not hesitate to contact us (fees would apply).