Many businesses pay employees some form of an allowance either as part of an industrial agreement or as an agreement with an employee. Allowances include items such as meals, dirt, height and first aid allowances.
As a general rule, allowances are taxable. This includes allowances such as a uniform allowance, laundry allowance, tool allowance and meal allowance. An allowance is usually a set amount that is provided to the employee without any supporting invoices.
Please refer to the checklist of taxable items for further guidance on the types of payments that are subject to payroll tax.
There are 2 types of allowances that only become taxable when they exceed a certain amount (referred to as the exempt component). These are the:
The accommodation allowance for 2020-21 is $283.45 per night (referred to as the exempt component) this amount consists of 3 parts:
The rate is set by the Australian Taxation Office (ATO) and is the total reasonable amount for daily travel allowances using the lowest capital city for the lowest salary band for the financial year.
If the amount paid to the employee exceeds the exempt component, the difference will be taxable for payroll tax purposes.
The allowance can be provided to cover accommodation, meals and incidentals. To claim the full accommodation allowance of $283.45 there must be an accommodation component. If the accommodation has been paid for by the employer the accommodation allowance can be exempt up to $136.45 which covers the meals and incidentals components ($20.40 + $116.05).
An accommodation allowance is paid to an employee to cover costs when they are temporarily away from their home due to work for periods of up to 21 days.
The Living Away from Home Allowance is different to an accommodation allowance as is paid to employees who are working at locations away from their normal home for longer periods. The Living Away from Home Allowance will trigger an Fringe Benefit Tax (FBT) obligation. You do not need to include it in the accommodation allowances component of your wages as it will be included in the FBT component. If you include it in both (allowances and FBT) you will be overpaying payroll tax.
Reimbursements for accommodation expenses are not taxable. For example if an employee pays for accommodation and expenses and then seeks reimbursement for a set amount as indicated on invoices these are a business expense and not taxable.
A list of accommodation allowances for previous years is available on our Rates and Thresholds page.
For information on accommodation allowances paid to truck drivers, see Revenue Ruling PTA024: Overnight Accommodation Allowances Paid to Truck Drivers.
The motor vehicle allowance for 2020-21 is $0.68 cents per kilometre. The rate is set by the Australian Taxation Office.
The motor vehicle exempt rate is aligned with the rate determined by the Federal Commissioner of Taxation for the previous financial year (that is, rate used in 2020-21 is the Australian Taxation Office 2019-20 rate).
A motor vehicle allowance paid or payable to an employee is taxable only to the extent that it exceeds the exempt rate per kilometre, or an amount calculated as the exempt component.
For motor vehicle allowances to apply the vehicle must be the employees own vehicle and the distance travelled must be for business purposes.
To claim the allowance the distance must be substantiated. This can be done either by:
- a continuous recording method during the financial year
- the Australian Taxation Office 12-week averaging method (can be used for 5 years)
- writing down the odometer reading at the start and end of the journey.
If the number of business kilometres can not be substantiated using one of the 3 methods described above, the full allowance will be taxable.
Motor vehicle allowance paid as a flat or fixed amount
A motor vehicle allowance which is paid as a flat or fixed amount is not an exempt car expense payment benefit for Fringe Benefit Tax purposes.
Where there are no records confirming the business kilometres travelled, the total of the motor vehicle allowance is subject to payroll tax. For example, a regular travelling allowance of $200 per month, paid to a sales person who keeps no records of the business use of his or her private motor vehicle, is taxable in full.
Where an employer maintains records to substantiate the business kilometres travelled in the period covered by the allowance, the exempt component may be calculated. The amount of a motor vehicle allowance paid up to the exempt component is exempt. Where the allowance exceeds the exempt component, only the amount in excess of the exempt component is taxable.
Calculating the exempt component
The exempt component for motor vehicle allowances is calculated as follows:
E = K x R
The example below shows you how you would calculate the exempt portion of the motor vehicle allowance for 2020-21.
A list of motor vehicle allowances for previous years is available on our Rates and Thresholds page.
Reimbursements are not taxable as they are a business expense not a wage payment. Reimbursements occur when an employee pays for something but they are then repaid the exact amount based upon a receipt.
Information Circulars and Revenue Rulings
Information Circulars and Revenue Rulings include decisions on the interpretation of legislation administered by RevenueSA and of changes in administrative practices or taxation laws.
Latest version appears in this list. Previous versions can be accessed from current version by navigating to Previous Versions section and selecting the link to the version you would like to view.
|PTA005||Exempt Allowances: Motor Vehicle and Accommodation||3||15/4/2019||Revenue Ruling|
|PTA025||Motor Vehicle Allowance Paid to Real Estate Salespersons||2||15/4/2019||Revenue Ruling|
|PTA024||Overnight Accommodation Allowances Paid to Truck Drivers||2||15/4/2019||Revenue Ruling|
|PTA011||Allowances & Reimbursements||1||1/7/2009||Revenue Ruling|
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