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Income and allowances

Last updated 15 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 from being an employee office worker in your tax return, this includes:

  • salary and wages, including cash or bonus payments
  • 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, car and vehicle expenses
  • as compensation for an aspect of your work such as working conditions or industry peculiarities – for example, health and safety representative allowance
  • 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 for industry peculiarities

Health and safety representative allowance

Higher duties allowance

No

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

An amount for certain expenses

Car or 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 the health and safety representative for his office. Mark's employer pays him an allowance for each week during the year that he holds that position.

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, but he can't claim a deduction for any expenses against the allowance.

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 income, deductible allowable

Ronaldo's employer requires him to wear a compulsory uniform. Ronaldo is also required to launder and repair is compulsory uniform when necessary.

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

Ronaldo must declare the uniform allowance as income in his tax return. He can also claim a deduction for cost of 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 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 the expenses.

Find out about office workers':

QC18955