Income and allowances

Amounts you do and don't include

You must include all the income you receive during the income year as an employee in the building and construction industry in your tax return, this includes:

salary and wages, including cash or bonus payments
allowances
compensation and insurance payments – for example, payments made under an income protection insurance policy to replace salary and wages.

Don't include as income any reimbursements you receive.

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

Allowances

You must include all allowances your employer reports on your income statement or payment summary as income in your tax return.

An allowance is where your employer pays you an amount:

to help you pay for a work expense – for example, tools and equipment
as compensation for an aspect of your work such as working conditions or industry peculiarities – for example, underground allowance
for having special duties, skills or qualifications – for example, first aid qualifications.

Your employer may not include some allowances on your income statement or payment summary. Find out about declaring income and claiming deductions for Allowances not on your income statement.

Allowances not on your income statement or payment summary

If you receive an allowance from your employer, it does not automatically mean you can claim a deduction.

Your employer may not include some allowances on your income statement or payment summary, you will find these amounts on your payslip. You don't need to declare these allowances as income in your tax return, unless you're claiming a deduction. Examples include travel allowances and overtime meal allowances.

If you spend the allowance amount on deductible work expenses, you:

don't include it as income in your tax return
can't claim any deductions for the work expenses the allowance covers.

If you're not claiming a deduction, you don't need to keep any records of the amounts you spend.

If you spend your allowance on deductible work-related expenses, to claim a deduction you:

must include the allowance as income in your tax return
include a claim for the work expenses you incur in your tax return
must have records of your expenses.

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

Example: Allowance not assessable, no deduction

Jason is a surveyor based in Perth. His employer is constructing some buildings in Geraldton which is a 4 and a half hour drive away.

Jason is required to travel to Geraldton for a week to survey the sites. He receives a travel allowance to cover his accommodation and meals while he is working in Geraldton.

The allowance is not shown on Jason's income statement and he spends the allowance he receives on accommodation and meals while he is working in Geraldton.

As the allowance is not on Jason's income statement, he:

doesn't need to declare it in his tax return at the end of the income year
can't claim a deduction for his accommodation and meal expenses.

End of example

Allowances and claiming a deduction

The following table sets out allowances you may receive and when you can claim a deduction.

Allowance types, reason for the allowance and if you can claim a deduction
Reason for allowance	Example of allowance type	Deduction (Yes or No)
Compensation for an aspect of your work that is unpleasant, special or dangerous or for industry peculiarities	Inclement weather Underground allowance	No These allowances don't help you pay for deductible work-related expenses
An amount for certain expenses	Tool and equipment allowance Laundry allowance	Yes If you incur deductible expenses
An amount for special skills	A first aid certificate	Yes If you incur deductible expenses

Example: allowance assessable, no deduction allowable

Mark is often required to work underground as part of his job. Mark's employer pays him an allowance for this. The training Mark requires to be able to work underground is provided by his employer.

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

Mark must include the amount of the allowance in his tax return. Mark can't claim a deduction for any expenses against the allowance because he has not incurred any deductible expenses.

The allowance compensates Mark for his special skills and additional duties. It's not to cover any expenses he might incur.

End of example

Example: allowance assessable, deduction allowable

Ronaldo's employer provides him with a compulsory uniform which he is required to launder and repair.

Ronaldo's employer pays him a laundry allowance which is on his income statement. Ronaldo regularly washes his uniform and in winter, he also dry-cleans his jacket.

As the laundry allowance is on Ronaldo's income statement, he must declare the laundry allowance as income in his tax return. He can also claim a deduction for the amount he spent laundering and dry cleaning his compulsory uniform.

End of example

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.

A reimbursement isn't an allowance.

If your employer reimburses you for expenses you incur:

you 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: