Withholding for allowances
Work out the withholding treatment and payment summary or STP Phase 1 reporting requirements for allowances.
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Overview
The correct withholding treatments and reporting requirements for various allowance types are listed in the tables below. The tables address the requirements for both:
- Single Touch Payroll (STP) Phase 1 pay event reporting
- payment summaries.
You must follow the relevant withholding and reporting requirements to allow your employees to correctly complete their income tax return.
For reporting of allowances in STP Phase 2, go to STP Phase 2 employer reporting guidelines.
Types of allowances and how they're treated
Table 1a lists types of allowances an employee might receive and describes how they are treated. You need to withhold for these allowances.
The employee is expected to incur expenses that may be claimed as a tax deduction at least equal to the amount of the allowance. The amount and nature of the allowance is shown separately in the accounting records of the employer.
Table 1a* – Types of allowances an employee might receive
Allowance type
|
Examples
|
Include on payment summary?
|
Part of OTE**? Does SG*** apply?
|
Working conditions, qualifications or special duties
|
- Crib, danger, dirt, height, site, shift or travelling time
- Trade, first aid certificate or safety officer
|
Yes (include total allowance in gross payment)
|
Yes
|
Non-deductible expenses
|
- Part-day travel (no overnight absence from employee's ordinary place of residence)
- Meals (not award overtime meal allowance or overnight travel allowance)
- Motor vehicle for non-deductible travel – eg home to work, including cents per kilometre payments
|
Yes (include total allowance in gross payment)
|
Yes
|
Deductible expenses
|
- Tools
- Compulsory uniform or dry cleaning
- Motor vehicle for work-related travel, including cents per kilometre payments in excess of ATO rate
- Overseas accommodation for deductible travel
|
Yes (show total allowance separately in the allowance box with an explanation)
|
No
|
On-call allowance (ordinary hours)
|
n/a
|
Yes (include total allowance in gross payment)
|
Yes
|
On-call allowance (outside ordinary hours)
|
n/a
|
Yes (include total allowance in gross payment)
|
No
|
*You need to withhold from allowances listed in Table 1a
**Ordinary time earnings (OTE)
***Super guarantee (SG)STP Phase 1 pay event requirements
Table 1b lists the STP Phase 1 pay event requirements for types of allowances an employee might receive.
Table 1b - STP Phase 1 pay events for types of allowances an employee might receive
Allowance type****
|
Include in gross payment?
|
Include in PAYGW for gross income type?
|
Include in allowance tuple?
|
STP Phase 1 field
|
Working conditions, qualifications or special duties
|
Yes
|
Yes
|
No
|
Gross PAYEVNTEMP47
|
Non-deductible expenses
|
Yes
|
Yes
|
No
|
Gross PAYEVNTEMP47
|
Deductible expenses
|
No
|
Yes
|
Yes
|
Other PAYEVNTEMP8
|
On-call allowance (ordinary hours)
|
Yes
|
Yes
|
No
|
Gross PAYEVNTEMP47
|
On-call allowance (outside ordinary hours)
|
Yes
|
Yes
|
No
|
Gross PAYEVNTEMP47
|
****Examples of the allowance types in Table 1b are the same as the examples in Table 1aAllowances subject to a varied rate of withholding
Tables 2 to 6 list allowances that are subject to a varied rate of withholding.
Table 2a – Cents per kilometre car expense payments using the approved rate
Allowance type
|
Are you required to withhold?
|
Include on payment summary?
|
Payments made by applying the approved (or a lower) rate to the number of kilometres travelled up to 5,000 business kilometres
|
No
|
Yes (show total allowance separately in the allowance box with an explanation).
|
Payments made by applying the approved (or a lower) rate to the number of kilometres travelled in excess of 5,000 business kilometres
|
Yes (from payments for the excess over 5,000 kilometres)
|
Yes (show total allowance separately in the allowance box with an explanation)
|
Payments made at a rate above the approved rate for distances travelled up to 5,000 business kilometres
|
Yes (from the amount which relates to the excess over the approved rate)
|
Yes (show total allowance separately in the allowance box with an explanation)
|
The allowance types in Table 2a are not considered OTE and SG does not apply.
Table 2b - STP Phase 1 pay event for cents per kilometre car expense payments using the approved rate
Allowance type
|
Include in gross payment?
|
Include in PAYGW for gross income type?
|
Include in allowance tuple?
|
STP Phase 1 Field
|
Payments made by applying the approved (or a lower) rate to the number of kilometres travelled up to 5,000 business kilometres
|
No
|
Yes
|
Yes
|
Car
|
Payments made by applying the approved (or a lower) rate to the number of kilometres travelled in excess of 5,000 business kilometres
|
No
|
Yes
|
Yes
|
Car
|
Payments made at a rate above the approved rate for distances travelled up to 5,000 business kilometres
|
No
|
Yes
|
Yes
|
Car
|
See an example and more information about the cents per kilometre method.
Table 3a – Award transport payments
Allowance type
|
Are you required to withhold?
|
Include on payment summary?
|
Part of OTE? Does SG apply?
|
Award transport payments that are deductible transport expenses
|
No
|
Yes (show total allowance separately in the allowance box with an explanation)
|
No
|
Award transport payments that are non-deductible transport expenses
|
Yes (from total payment)
|
Yes (include total allowance in gross payment))
|
Yes
|
Table 3b - STP Phase 1 pay event for award transport payments
Allowance type
|
Include in gross payment?
|
Include in PAYGW for gross income type?
|
Include in allowance tuple?
|
STP Phase 1 Field
|
Award transport payments that are deductible transport expenses
|
No
|
Yes
|
Yes
|
Transport
|
Award transport payments that are non-deductible transport expenses
|
Yes
|
Yes
|
No
|
Gross PAYEVNTEMP47
|
See examples and more information about award transport payments.
Table 4a – Laundry (not dry cleaning) allowance for deductible clothing
Allowance type
|
Are you required to withhold?
|
Include on payment summary?
|
Up to the threshold amount
|
No
|
Yes (show total allowance separately in the allowance box with an explanation)
|
Over the threshold amount
|
Yes (from the excess over the threshold amount)
|
Yes (show total allowance separately in the allowance box with an explanation)
|
The allowance types in Table 4a are not considered OTE and SG does not apply.
Table 4b - STP Phase 1 pay event for laundry (not dry cleaning) allowance for deductible clothing
Allowance type
|
Include in gross payment?
|
Include in PAYGW for gross income type?
|
Include in allowance tuple?
|
STP Phase 1 Field
|
Up to the threshold amount
|
No
|
Yes
|
Yes
|
Laundry
|
Over the threshold amount
|
No
|
Yes
|
Yes
|
Laundry
|
Work out costs you can claim for clothing, laundry and dry cleaning expenses.
Table 5a – Award overtime meal allowances
Allowance type
|
Are you required to withhold?
|
Include on payment summary?
|
Up to reasonable allowances amount
|
No
|
No
|
Over reasonable allowances amount (allowance must be paid under an industrial instrument in connection with overtime worked)
|
Yes (from the excess over reasonable allowances amount)
|
Yes (show total allowance separately in the allowance box with an explanation)
|
The allowance types in Table 5a are not considered OTE and SG does not apply.
Table 5b - STP Phase 1 pay event for award overtime meal allowances
Allowance type
|
Include in gross payment?
|
Include in PAYGW for gross income type?
|
Include in allowance tuple?
|
STP Phase 1 Field
|
Up to reasonable allowances amount
|
No
|
No
|
No
|
n/a
|
Over reasonable allowances amount (allowance must be paid under an industrial instrument in connection with overtime worked)
|
No
|
Yes
|
Yes
|
Meals
|
See examples and more information about overtime meal allowances.
Table 6a – Domestic or overseas travel allowance involving an overnight absence from employee's ordinary place of residence
Allowance type
|
Are you required to withhold?
|
Include on payment summary?
|
Up to reasonable allowances amount
|
No
|
No
|
Over reasonable allowances amount
|
Yes (from the excess over reasonable allowances amount)
|
Yes (show total allowance separately in the allowance box with an explanation)
|
Overseas accommodation
|
Yes
|
Yes (show total allowance separately in the allowance box with an explanation)
|
The allowance types in Table 6a are not considered OTE and SG does not apply.
Table 6b - STP Phase 1 pay event for domestic or overseas travel allowance involving an overnight absence from employee's ordinary place of residence
Allowance type
|
Include in GROSS PAYMENT?
|
Include in PAYGW for gross income type?
|
Include in allowance tuple?
|
STP Phase 1 Field
|
Up to reasonable allowances amount
|
No
|
No
|
No
|
n/a
|
Over reasonable allowances amount
|
No
|
Yes
|
Yes
|
Travel
|
Overseas accommodation
|
No
|
Yes
|
Yes
|
Travel
|
Work out if the exception applies and what is covered in travel allowances.
Labour-hire workers who receive living-away-from-home allowance (LAFHA) can't access Fringe Benefits Tax (FBT) concessions. LAFHA is considered ordinary income and withholding applies.
FBT rules exclude labour-hire arrangements from the concessions as the labour-hire firm is not the employer of the worker.
For more information and examples of allowances, see:
- TD 2021/6 Income tax: what are the reasonable travel and overtime meal allowance expense amounts for the 2021-22 income year?
- TR 2021/1 Income tax: when are deductions allowed for employees’ transport expenses?
- TR 2020/1 Income tax: employees: deductions for work expenses
- TR 98/5 Income tax: calculating and claiming a deduction for laundry expenses
Work out the withholding treatment and payment summary or STP Phase 1 reporting requirements for allowances.