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Income and allowances

Last updated 2 June 2023

Income and allowance amounts you need to include in your tax return and amounts you don’t include.

Amounts you do and don't include

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

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

Don't include as income any reimbursements you receive.

Your income statement or a payment summary will 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 as an estimate of costs you might incur:

  • 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, handling pesticides
  • as an amount for having special duties, skills or qualifications – for example, first aid qualifications.

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

Allowances not on your income statement

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, 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 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 a deductible work-related expense, to claim a deduction you:

  • 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.

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 industry peculiarities

Handling pesticides

Remote area allowance

No
These allowances don't help you pay for deductible work-related expenses.

An amount for certain expenses

Tool and equipment allowance

Yes
If you incur deductible expenses.

An amount for special skills

A first aid certificate

Yes
If you incur deductible expenses.

 

Example: allowance for dangerous working conditions

Mario is a farm hand on a produce farm. Mario's role requires him to spray weeds around the produce trees. Mario's employer pays him an allowance of $1.35 per hour for the time he spends using pesticides.

At the end of the income year, Mario's employer shows the allowance on his income statement.

Mario must include the allowance as income in his tax return.

Mario can't claim a deduction because he doesn't incur any expenses. The allowance compensates Mario for an aspect of his work that is dangerous. It's not to help him pay for deductible work-related expenses.

End of example

 

Example: allowance assessable, deduction allowed

Bronwyn is a farm manager. Her employer owns a farm on 50 acres of land. During the income year, Bronwyn uses her own car to transport herself and the other farm workers to other areas of the farm. Bronwyn's employer pays her 80 c per kilometre when she uses her car for work purposes.

At the end of the year, her income statement shows she receives an allowance of $3,372 for using her car for work (4215 kms × $0.80 = $3,372).

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 received. Rather she must calculate the amount of the deduction based on 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 used her car to travel 4215 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 year is 78c per kilometre.

Bronwyn claims a deduction of $3,287.70. Bronwyn calculates her deduction as 320 kms × $0.78 = $3,287.70.

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 considered to be 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 agricultural workers':

QC61560