• Travel allowances

    Travel allowance is a payment made to an employee to cover accommodation, food, drink or incidental expenses they incur when they travel away from their home overnight in the course of their duties.

    Allowances folded into your employee's salary or wages are taxed as salary and wages and tax has to be withheld, unless an exception applies.

    You include the amount of the travel allowance in the allowance box on your employee's payment summary.

    The exception applies where:

    • you expect your employee to spend all of the travel allowance you pay them on accommodation, food, drink or incidental expenses
    • you show the amount and nature of the travel allowance separately in your accounting records
    • the travel allowance is not for overseas accommodation
    • the amount of travel allowance you pay your employee is less than, or equal to the reasonable travel allowance rate.

    If the exception applies, you:

    • don't withhold tax from the travel allowance you pay your employee
    • don't include the amount of the travel allowance in the allowance box on your employee's payment summary
    • only include the allowance on their payslip.

    If the first two exception conditions are met but you pay your employee a travel allowance over the reasonable travel allowance rate, you're required to withhold tax from the amount that exceeds the reasonable travel allowance rate. You also need to include the total amount of the travel allowance in the allowance box on your employee's payment summary.

    You are always required to withhold tax from a travel allowance for overseas accommodation and include the amount of the travel allowance in the allowance box on your employee's payment summary.

    Reasonable travel allowance rate

    Each year we publish the amounts we consider reasonable for claims for domestic and overseas travel allowance expenses.

    See also:

    Last modified: 05 Apr 2017QC 18645