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Income and allowances

Last updated 18 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 as a recruitment consultant during the income year 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 show all your salary, wages and allowances (including commissions) 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. You can claim a deduction for work expenses you incur and pay for with the allowance.

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, mobile phone expenses
  • as compensation for an aspect of your work such as working conditions or industry peculiarities – for example, working in a remote locality
  • 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, reasons for the allowances 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

Shift loading 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 a recruitment consultant and 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, deduction allowable

Bronwyn is a recruitment consultant. During the income year, Bronwyn uses her own car to travel:

  • from her home of the office to offsite venues to attend work-related conferences and seminars
  • to drop off documents and attend meetings with clients.

Bronwyn's employer pays her 50c per kilometre when she uses her car for work purposes.

At the end of the year, her income statement shows she was paid an allowance of $1,280 for using her car for work (2,560 kms ×$0.50 =$1,280).

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 travelled 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 78c per kilometre.

Bronwyn claims a deduction of $1,966.80. Bronwyn calculates her deduction as 2,560 kms × $0.78 = $1966.80.

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 recruitment consultants':

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