Amounts you do and don't include
You must include all the income you receive during the income year as an Australian Defence Force member in your tax return, this includes:
- salary and wages, including cash or bonus payments
- allowances
- compensation and insurance payments – for example, payments made under an income protection insurance policy to replace salary and wages.
Don't include as income any reimbursements you receive.
Your income statement or a payment summary will show your salary, wages and allowances for the income year.
If you work overseas, your salary and wages may not be taxable, but in some circumstances, you still include them in your tax return.
Eligible duty in a specified area outside Australia
Your pay and allowances are exempt from tax if you have a certificate from the Chief of the Defence Force stating that you are on eligible duty:
- with a specified organisation
- in a specified area outside Australia.
Your income statement or payment summary will list Section 23AD as an exemption and the number of days it applies. You don't include this income in your tax return.
Foreign deployment as a member of a disciplined force
Your foreign employment income may be exempt from Australian income tax if you satisfy all of the following conditions:
- you are an Australian resident for tax purposes
- you are engaged in foreign service for a continuous period of 91 days or more
- your foreign service is directly attributable to your deployment outside Australia as a member of a disciplined force by the Commonwealth, a State or Territory, or an authority of the Commonwealth, a State or Territory.
When we say 'disciplined force', we mean the Australian Defence Force, Australian Federal Police, and the State and Territory police forces, including a peacekeeping force.
Your foreign employment income includes salary, wages and allowances.
However, your foreign employment income isn't exempt from Australian income tax if it's exempt from income tax in the country where you earn that income because:
- a tax treaty applies, or a law of the foreign country applies to give effect to a tax treaty
- the foreign country doesn't impose tax on employment income
- an international agreement applies that deals with diplomatic or consular privileges or immunities, or privileges and immunities of persons connected with international organisations
- the foreign country has a law that corresponds to the International Organisations (Privileges and Immunities) Act 1963.
If your employer knows you satisfy the conditions, your income statement or payment summary will list Section 23AG as an exemption and the number of days it applies for. You include this income as exempt foreign employment income in your tax return. You are not taxed on this income but it's included in the calculation to work out how much tax you pay on your other income.
Allowances
As a member of the ADF or an ADF employee, you may be paid an allowance in recognition of your duties and additional expenses you incur to perform your duties. As a general rule:
- you need to include allowances on your income statement or payment summary in your tax return
- allowances that are not taxable will not be on your income statement or payment summary.
Allowances on your income statement or payment summary
You must include all allowances your employer reports on your income statement or payment summary as income in your tax return.
If you receive an allowance from your employer, you can't always claim a deduction – it depends on the situation.
The following assessable allowances are received by ADF members and employees to recognise expenses you may incur while doing your job:
- protective clothing allowance
- language proficiency allowance
- tool allowance
- overtime meal allowance
- motor vehicle allowance.
Depending on your individual circumstances, you may be able to claim a deduction for the expenses these allowances cover.
ADF members and employees receive assessable allowances:
- for work that is considered special or dangerous
- in recognition of holding special skills
- to compensate for working conditions.
You must include the following allowances as income in your tax return, however you can't claim a deduction for:
- arduous conditions instructor allowance
- clearance diver allowance
- district allowance
- diving allowance
- field allowance
- first aid allowance
- flying disability allowance
- paratrooper allowance
- locality allowance
- duty at sea allowance
- separation allowance
- submarine escape disability allowance
- unpredictable explosives allowance.
This is not a complete list of allowances that may fall into this category. There may be other similar allowances you receive as an ADF member or employee.
Your employer may not include some allowances on your income statement. Find out about declaring income and claiming deductions for Allowances not on your income statement.
Example: allowance is assessable, no deduction allowable
Mark is a member of the Navy. During the income year, Mark receives an allowance for each hour he spends carrying out his employment duties in a confined space.
His employer reports the allowance on his income statement at the end of the income year.
Mark must include the amount of the allowance in his tax return but he can't claim a deduction for any expenses against the allowance.
The allowance compensates Mark for working in unpleasant conditions. It isn't to cover any expenses he might incur.
End of example
Example: allowance is assessable, deduction allowable
Ronaldo is a metal trades employee in the Army. Ronaldo's employer doesn't provide him with tools, so he receives a tool allowance each week.
The total amount of the tool allowance is reported on Ronaldo's income statement at the end of the income year.
During the income year, Ronaldo buys a number of tools to carry out his employment duties. He uses the tools solely for work purposes.
Ronaldo must declare the tool allowance as income in his tax return. He can also claim a deduction for the decline in value of the tools he bought during the income year.
End of exampleAllowances not on your income statement
If you receive an allowance from your employer, it does not automatically mean you can claim a deduction.
Your employer may not include some allowances on your income statement, you will find these amounts on your payslips. You don't need to declare these allowances as income in your tax return, unless you are claiming a deduction. Examples include travel allowances and overtime meal allowances.
If you spend the allowance amount on work expenses, you:
- don't include it as income in your tax return
- can't claim any deductions for the work expenses the allowance covers.
If you're not claiming a deduction, you don't need to keep any records of the amounts you spend.
If you spend your allowance on a deductible work-related expense, to claim a deduction you:
- include the allowance as income in your tax return
- include a claim for the work expenses you incur in your tax return
- must have records of your expenses.
If you can claim a deduction, the amount of the deduction is not usually the same amount as the allowance you receive.
Reimbursements
If your employer pays you the exact amount for expenses you incur (either before or after you incur them), the payment is a reimbursement.
A reimbursement isn't considered to be an allowance.
If your employer reimburses you for expenses you incur:
- you don't include the reimbursement as income in your tax return
- you can't claim a deduction for the expenses.
Example: reimbursement for expenses
Edwina is a ground crew officer in the Air Force. Edwina's employer provides her with the safety equipment she requires for her job, however she finds the hearing protection uncomfortable for her ears.
Edwina buys hearing protection which is more comfortable for her with the same specifications as the ones her employer provides. Edwina puts in a reimbursement claim and receives the full cost of the hearing protection from her employer.
Edwina can't claim a deduction for the cost of the hearing protection because she receives a full reimbursement from her employer for the amount spent.
Edwina doesn't have to include the amount of the reimbursement in her tax return as income.
End of exampleOffsets for ADF members
ADF members and employees may be eligible to receive:
- A zone tax offset, when you live in an isolated or remote part of Australia (excluding an offshore oil or gas rig)
- An overseas forces tax offset, when you serve as a member of the Defence Force at an overseas locality (excluding at an attaché at an Australian embassy or Legation).
To help you work out your eligibility for an offset use the Zone or overseas forces tax offset calculator.
Find out about ADF members':