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  • Withholding for allowances

    The correct withholding treatments and reporting requirements for various allowance types are listed in the tables below. The tables address both the payment summary and Single Touch Payroll (STP) pay event requirements.

    Table 1a lists the various types of allowances that an employee might receive and describes how these allowances are treated. You're required to withhold for these allowances.

    Table 1b lists the STP pay event requirements for the various types of allowances that an employee might receive.

    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 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 are required to withhold from allowances listed in Table 1a
    **Ordinary time earnings (OTE)
    ***Super guarantee (SG)

    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 1b - STP 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 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 1a
    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 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 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

    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 pay event for award transport payments

    Allowance type

    Include in gross payment?

    Include in PAYGW for gross income type?

    Include in allowance tuple?

    STP Field

    Award transport payments that are deductible transport expenses

    No

    No

    Yes

    Transport

    Award transport payments that are non-deductible transport expenses

    Yes

    Yes

    No

    Gross PAYEVNTEMP47

    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 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 Field

    Up to the threshold amount

    No

    Yes

    Yes

    Laundry

    Over the threshold amount

    No

    Yes

    Yes

    Laundry

    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 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 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

    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 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 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

    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: 22 May 2019QC 51680