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  • Lawyers – income and work-related deductions

    If you earn your income as a lawyer this guide will help you work out what:

    • income and allowances to report
    • you can and can't claim as a work-related deduction
    • records you need to keep.

    We consider you to be an employee lawyer if you are employed as a solicitor, articled clerk, law clerk, court clerk or paralegal.

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    Income – salary and allowances

    Include all the income you receive as a Lawyer during the income year in your tax return, this includes:

    Don't include reimbursements.

    Your income statement or payment summary will show all your salary, wages and allowances for the income year.

    Salary and wages

    You must include your salary and wages as income in your tax return. Include any bonuses.

    Allowances

    Include all allowances shown on your income statement or payment summary as income in your tax return.

    While all allowances you receive from your employer are income, you can't always claim a deduction if you receive an allowance – it depends on the situation.

    If you can claim a deduction, the amount of the deduction is not usually the same amount as the allowance you receive.

    Allowance types, reasons and deductibility

    Reason for allowance

    Example of allowance type

    Deduction (Yes or No)

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

    Harassment contact officer allowance

    No

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

    Compensation for industry peculiarities

    Stand-by 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 assessable, no deduction

    Penny is a solicitor. Penny's employer has asked her to take on the role of the Health and Safety officer for the office. Penny receives an allowance of $18.15 for each week she is in this role.

    At the end of the income year, Penny's employer includes her total allowance of $943.80 on her income statement.

    Penny must declare the allowance of $943.80 as income in her tax return.

    Penny can't claim a deduction. The allowance compensates Penny for the additional role she performs. It is not to help cover any expenses that Penny might incur.

    End of example

     

    Example: allowance assessable, deduction allowable

    Bronwen is a law clerk. During the income year, Bronwyn uses her own vehicle to travel from the office to the Court to drop off documents. Bronwyn's employer pays her 80 cents 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 $256 for using her car for work (320kms x 80 cents).

    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. 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 320kms 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 72 cents per kilometre.

    Bronwyn claims a deduction of $230.40.

    End of example

    Difference between allowances and reimbursements

    An allowance does not include a reimbursement.

    If your employer pays you:

    • an amount based on an estimate of what you might spend, such as paying cents per kilometre if you use your car for work, then it's an allowance
    • for the actual amount of the expense (either before or after you incur the expense), such as paying for the petrol you use if you use your car for work, it's a reimbursement.

    Allowances not on your income statement or payment summary

    Your employer may not include some allowances on your income statement or payment summary. This can apply to travel allowances and overtime meal allowances paid under an industrial law, award or agreement. You can see these allowances on your payslips.

    If the allowance isn't on your income statement or payment summary, and you:

    • spent the whole amount on deductible expenses, you  
      • don't include it as income in your tax return
      • can't claim any deductions for these expenses
    • spent more than your allowance, you  
      • include the allowance as income in your tax return
      • can claim a deduction for your expense (if you're eligible).

    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. We don't consider a reimbursement to be an allowance.

    If your employer reimburses for expenses you incur:

    • don't include the reimbursement as income in your tax return
    • you can't claim a deduction for the expenses.

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      Last modified: 24 May 2022QC 51251