• Withholding for allowances

    The correct withholding treatments and payment summary requirements for various allowance types are listed in the tables below.

    Table 1 lists the various types of allowances that an employee might receive and describes how these allowances are treated.

    Tables 2 to 6 list those allowances that are subject to a varied rate of withholding.

    You must follow the withholding and reporting requirements to allow your employees to correctly complete their income tax return.

    Table 1 – Types of allowances an employee might receive

    Allowance type

    Examples of allowances

    Are you required to withhold?

    Include on payment summary? If so, how?

    Does super guarantee apply?

    Allowances for working conditions, qualifications or special duties

    Crib, danger, dirt, height, site, shift or travelling time

    Trade, first aid certificate or safety officer

    Yes

    Yes (include total allowance in gross payment)

    Yes

    Allowances for 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

    Yes (include total allowance in gross payment)

    Yes

    Allowances for expected 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

     

    Yes (show total allowance separately in the allowance box with an explanation)

     

    No

    On-call allowance (ordinary hours)

     

    Yes

    Yes (include total allowance in gross payment)

    Yes

     On-call allowance (outside ordinary hours)

     

    Yes

    Yes (include total allowance in gross payment)

    No

    The employee is expected to incur expenses that may be claimed as a tax deduction at least equal to the amount of the allowance, and the amount and nature of the allowance is shown separately in the accounting records of the employer.

    Table 2 – Cents per kilometre car expense payments using the approved rate

    Allowance type

    Are you required to withhold?

    Include on payment summary? If so, how?

    Does super guarantee apply?

    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 allowance box with an explanation)

    No

    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 allowance box with an explanation)

    No

    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 allowance box with an explanation)

    No

    Table 3 – Award transport payments

    Allowance type

    Are you required to withhold?

    Include on payment summary? If so, how?

    Does super guarantee apply?

    For deductible transport expenses

    No

    Yes (show total allowance separately in allowance box with an explanation)

    No

    For non-deductible transport expenses

    Yes (from total payment)

    Yes (include total allowance in gross payment)

    Yes

    Table 4 – Laundry (not dry cleaning) allowance for deductible clothing

    Allowance type

    Are you required to withhold?

    Include on payment summary? If so, how?

    Does super guarantee apply?

    Up to the threshold amount

    No

    Yes (show total allowance separately in allowance box with an explanation)

    No

    Over the threshold amount

    Yes (from the excess over the threshold amount)

    Yes (show total allowance separately in allowance box with an explanation)

    No

    Table 5 – Award overtime meal allowances

    Allowance type

    Are you required to withhold?

    Include on payment summary? If so, how?

    Does super guarantee apply?

    Up to reasonable allowances amount

    No

    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 allowance box with an explanation)

    No

    Table 6 – 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? If so, how?

    Does super guarantee apply?

    Up to reasonable allowances amount

    No

    No

    No

    Over reasonable allowances amount

    Yes (from the excess over reasonable allowances amount)

    Yes (show total allowance separately in allowance box with an explanation)

    No

    Overseas accommodation

    Yes

    Yes (show in the allowance box)

    No

    Labour-hire workers who receive living-away-from-home allowance (LAFHA) can't access 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.

    See also:

    Last modified: 31 Jul 2017QC 51680