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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 an employee in the retail industry 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 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, steel cap boots
  • as compensation for an aspect of your work such as working conditions or industry peculiarities – for example, working in the cold
  • 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

Cold work allowance

Recall allowance

No

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

An amount for certain expenses

Overtime meal 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

Conchita is a supermarket employee. When Conchita works in the dairy section of the supermarket she receives an allowance of 47c per hour from her employer.

At the end of the income year, the total allowance is shown on her income statement. Conchita must declare the allowance as income in her tax return.

Conchita can't claim a deduction. The allowance compensates her for working in unpleasant conditions. It is not to help Conchita pay for any work-related expenses she might incur.

End of example

 

Example: allowance is assessable income, deduction allowable

Saul is a sales assistant at an electrical goods store. His employer requires him to wear a uniform consisting of a shirt with the company's name and logo embroidered on the pocket, black trousers and black shoes. The shirts are provided to Saul by his employer but he has to buy his trousers and shoes.

As Saul is responsible for laundering his uniform, Saul's employer pays him a laundry allowance. The allowance is shown on his income statement at the end of the income year.

Saul must include the laundry allowance as income in his tax return.

Saul can claim a deduction for the cost of laundering his uniform shirt. Saul can't claim a deduction for the cost of laundering his black pants as they are conventional everyday clothing.

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 retail industry workers':

QC51271