• Tax on allowances paid to religious practitioners

    An allowance is a separately identified payment made to a religious practitioner for any of the following:

    • qualifications or special duties, for example, first aid certificate, safety officer
    • expenses that cannot be claimed as a tax deduction by the religious practitioner, such as normal travel between home and work
    • work expenses that may be able to be claimed as a tax deduction by the religious practitioner, including services at different locations.

    How to withhold

    Refer to the tables below for the correct withholding treatment for allowances.

    Table 1 lists the various types of allowances that a religious practitioner might receive and describes how these allowances must be treated.

    Table 2 lists those allowances that are subject to a varied rate of withholding and explains how they are reported on the payment summary. Allowances are subject to a varied rate of withholding if all the following apply:  

    • The religious practitioner is expected to incur expenses that may be able to be claimed as a tax deduction at least equal to the amount of the allowance.
    • The amount and nature of the allowance is shown separately in the accounting records of the payer.

    Table 1: Allowances subject to PAYG withholding

    Allowance type

    Are you required to withhold from allowances?

    Is the allowance to be included on the payment summary? If so, how is it to be shown?

    Allowances paid for working conditions, qualifications or special duties  

    For example, travelling time, first aid certificate or safety officer.

    Yes

    Yes

    (include total allowance in gross payment)

    Allowances for non-deductible expenses  

    For example:

    • part day travel (no overnight absence from religious practitioner's ordinary place of residence)
    • meals (not award overtime meal allowance or overnight travel allowance)
    • motor vehicle for non-deductible travel, e.g. home to work, including cents per kilometre payments.

     

    Yes

    Yes

    (include total allowance in gross payment

    Allowances for expected deductible expenses  

    For example:

    • motor vehicle for work related travel, including cents per kilometre payments in excess of ATO rate (1)
    • overseas accommodation for deductible travel.

     

    Yes

    Yes

    (show total allowance separately in the allowance box with an explanation)

    Table 2: Allowances that are subject to a varied rate of withholding  

    Refer to the notes for further information about certain allowances.

    Allowance type

    Are you required to withhold from allowances?

    Is the allowance to be included on payment summary? If so, how is it to be shown?

    Cents per kilometre car expense payments using ATO rates (1)  

    For payments made by applying the ATO rate to the number of kilometres travelled where the usage is up to 5,000 business kilometres.

     

    No

    Yes
    (show total allowance separately in allowance box with an explanation)

    For payments made by applying the ATO rate to the number of kilometres travelled where the usage is in excess of 5,000 business kilometres.

     

    Yes
    (from the payment for the excess over 5,000 km)

    Yes
    (show total allowance separately in allowance box with an explanation)

    Domestic or overseas travel allowance involving an overnight absence from payee's ordinary place of residence (2)  

    Up to reasonable allowances amount

     

    No

    No

    Over reasonable allowances amount

    An allowance for overseas accommodation must be subject to PAYG withholding and be shown in the allowance box on the payment summary.

    Yes
    (from excess over reasonable allowances amount)

    Yes
    (show total allowance separately in allowance box with an explanation)

    1. The approved rate is 66 cents per kilometre for the year commencing 1 July 2016 (refer to 'Calculating your deduction' in Claiming a deduction for car expenses using the cents per kilometre method).

    2. Each year we publish a determination setting out the reasonable amounts for:

    • overtime meal allowance expenses
    • domestic travel allowance expenses
    • overseas travel allowance expenses.

    See also:

      Last modified: 31 Aug 2016QC 16615