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Income and allowances

Last updated 20 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 tradesperson 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 a 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, 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 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

Examples of allowance types

Deduction (Yes or No)

Compensation for an aspect of your work that is unpleasant, special or dangerous or for industry peculiarities

Industry allowances

Underground allowance

Electrician's licence allowance

Multistorey allowance

Laser operation allowance

Carpenter-diver allowance

Air-conditioning industry and refrigeration industry allowances

In charge of plant allowances

Inclement weather

Computer quantities allowance

Scaffolding and rigging certificate

Leading hand allowance.

No

Income tax applies to these allowances but you can't claim a deduction. These allowances don't help you pay for deductible work-related expenses

An amount for certain expenses

Award transport payment (motor vehicle allowance, fares allowance and other travelling time entitlements)

Tool allowance

Overtime meal allowance

Grindstone 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, deduction allowable

Roger is a carpenter. Roger's employer doesn't provide him with tools but pays Roger a tool allowance of $1,130 per year.

During the income year, Roger buys a new circular saw for $729. The tool allowance is shown on Roger's income statement at the end of the income year.

Roger must include the tool allowance as income in his tax return.

Roger can claim a deduction for the decline in value of his circular saw.

End of example

 

Example: allowance assessable, no deduction

Maris works as a concreter. When Maris works in the rain, she receives an allowance from her employer.

At the end of the income year, Maris's employer includes the allowance on her income statement.

Maris must include the allowance as income in her tax return.

Maris can't claim a deduction because she doesn't incur any deductible expenditure. The allowance compensates Maris for working in unpleasant conditions. It is not to help pay for expenses Maris might incur.

End of example

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 have receive.

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 employee tradesperson:

QC56093