• Taxing of allowances and reimbursements paid to workers under a labour-hire or on-hire arrangement

    The pay as you go (PAYG) withholding system requires a labour hire firm (payers) to withhold an amount from payments made to individuals who perform work or service directly for clients of the labour-hire firm, whether or not the worker is characterised as an employee or independent contractor.

    Individuals or clients of a labour-hire firm are:

    • workers under a labour-hire arrangement
    • on-hired workers
    • out-posted workers.

    This document outlines the correct withholding treatment of allowances and reimbursements paid to workers under a labour-hire arrangement, on-hired or out-posted workers.

    See also:

    What are allowances?

    Allowances are separately identified payments made to a worker for:

    • working conditions – for example, danger, height or dirt
    • qualifications or special duties – for example, first aid certificate or safety officer
    • expenses that cannot be claimed as a tax deduction by the worker, for example, normal travel between home and work
    • work expenses that could be claimed as a tax deduction by the worker, for example, travel between work sites.
      Last modified: 15 Jul 2016QC 16328