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  • Building and construction employees – income and work-related deductions

    If you earn your income as a building and construction employee, this guide will help you work out what:

    • income and allowances to report
    • you can and can't claim as a work-related deduction
    • records you need to keep.

    Find out about building and construction employees':

    Income – salary and allowances

    Include all the income you receive during the income year in your tax return, this includes:

    Don't include reimbursements.

    Your income statement or payment summary will show all your salary, wages and allowances for the income year.

    Salary and wages

    You must include your salary and wages as income in your tax return. Include any bonuses.

    Allowances

    Include all allowances shown on your income statement or payment summary as income in your tax return.

    While all allowances you receive from your employer are income, you can't always claim a deduction if you receive an allowance – it depends on the situation.

    If you can claim a deduction, the amount of the deduction is not usually the same amount as the allowance you receive.

    You may receive an allowance to:

    • compensate you for an aspect of your work, for example, working in unpleasant or dangerous conditions, such as wet or cold weather
    • help you to pay for certain expenses such as meals when you travel for work.
    • compensate you for work that may be unpleasant, special or dangerous
    • in recognition of holding special skills
    • to compensate for industry peculiarities.

    Allowances paid to help pay for expenses

    The following allowances are received by tradespeople to recognise expenses you may incur while doing your job. Depending on your individual circumstances, you may be entitled to claim a deduction if you receive:

    • Award transport payment (motor vehicle allowance, fares allowance and other travelling time entitlements)
    • Tool allowance
    • Overtime meal allowance
    • Grindstone allowance.

    Example: allowance assessable, deduction allowable

    Roger is a carpenter. Roger's employer does not provide him with tools but pays Roger a tool allowance of $1,130 per year. During the income year, Roger buys a new circular saw for $729. The tool allowance is shown on Roger's income statement at the end of the income year.

    Roger must include the tool allowance as income in his tax return.

    Roger can claim a deduction for the decline in value of his circular saw.

    End of example

    Allowances paid to compensate for working conditions or special skills

    The following allowances are commonly received by tradespeople for work considered to be special or dangerous, in recognition of holding special skills or to compensate for working conditions. Income tax applies to these allowances, but you can't claim a deduction if you receive:

    • Industry allowances
    • Underground allowance
    • Electrician's licence allowance
    • Multistorey allowance
    • Laser operation allowance
    • Carpenter-diver allowance
    • Air-conditioning industry and refrigeration industry allowances
    • In charge of plant allowances
    • Inclement weather
    • Computer quantities allowance
    • Scaffolding and rigging certificate
    • Leading hand allowance

    Example: allowance assessable, no deduction

    Maris works as a concreter. When Maris is required to work in the rain, she is paid an allowance by her employer.

    At the end of the income year, Maris's employer includes the allowance on her income statement.

    Maris must include the allowance as income in her tax return.

    Maris can't claim a deduction because she does not incur any deductible expenditure. The allowance is paid to compensate Maris for working in unpleasant conditions. It is not paid to help pay for expenses Maris might incur.

    End of example

    Difference between allowances and reimbursements

    An allowance does not include a reimbursement.

    If your employer pays you:

    • an amount based on an estimate of what you might spend, such as paying cents per kilometre if you use your car for work, then it's an allowance
    • for the actual amount of the expense (either before or after you incur the expense), such as paying for the petrol you use if you use your car for work, it's a reimbursement.

    Allowances not shown on your income statement or payment summary

    Your employer may not include some allowances on your income statement or payment summary. This can apply to travel allowances and overtime meal allowances paid under an industrial law, award or agreement. You can see these allowances on your payslips.

    If the allowance is not on your income statement or payment summary, and you:

    • spent the whole amount on deductible expenses, you       
      • don't include it as income in your tax return
      • can't claim any deductions for these expenses
    • spent more than your allowance, you        
      • include the allowance as income in your tax return
      • can claim a deduction for your expense, if you are eligible.

    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. We don't consider a reimbursement to be an allowance.

    If your employer reimburses you for expenses you incur:

    • don't include the reimbursement as income in your tax return
    • you can't claim a deduction for them.

    Find out about building and construction employees':

      Last modified: 16 May 2022QC 24373