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  • IT professionals – income and work-related deductions

    If you earn your income as an IT professional, 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.

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    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.

    Allowance types, reasons and deductibility

    Reason for allowance

    Example of allowance type

    Deduction (Yes or No)

    Compensation for an aspect of your work that is unpleasant, special or dangerous

    Health and safety representative

    No

    These allowances don't help you pay for deductible work-related expenses

    Compensation for industry peculiarities

    On call allowance

    No

    These allowances don't help you pay for deductible work-related expenses

    An amount for certain expenses

    Vehicle allowance

    Yes

    If you incur deductible expenses

    An amount for special skills

    A first aid certificate

    Yes

    If you incur deductible expenses

     

    Example: allowance is assessable income, no deduction allowable

    Mark is an employee computer programmer and he is the health and safety representative for his office. Mark's employer pays him an allowance for each week during the income year that he holds that position.

    At the end of the income year, the allowance is on his income statement.

    Mark must include the on call allowance as income in his tax return.

    Mark can't claim a deduction, the allowance compensates Mark for his special additional duties. It's not to cover any expenses he might incur.

    End of example

     

    Example: allowance is assessable deduction, deduction allowable

    Bronwyn is a computer system repairer. During the income year, Bronwyn uses her own vehicle to travel:

    • from her office to a training facility to attend training
    • to attend clients' premises to work on their systems.

    Bronwyn's employer pays her 80 cents per kilometre when she uses her car for work purposes.

    At the end of the year, her income statement shows an allowance of $256 for using her car for work (320 kms × 80 cents).

    Bronwyn must include the car allowance as income in her tax return.

    Bronwyn can claim a deduction for the cost of using her car for work purposes. She can't claim the amount of the allowance she receives. Bronwyn must calculate the amount of the deduction using the records she keeps whenever she uses her own car for work purposes.

    In the past year Bronwyn has kept a record of the work trips she did using her own car, but she doesn't keep a logbook. Her records show she travels 320 kms for work purposes.

    As Bronwyn has not kept a logbook, she uses the cents per kilometre method to claim a deduction. The cents per kilometre method rate for the income year is 72 cents per kilometre. Bronwyn claims a deduction of $230.

    End of example

    Difference between allowances and reimbursements

    An allowance doesn't 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 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 isn't 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're 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.

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      Last modified: 24 May 2022QC 26103