Allowances paid with employment income 108-22070639

The income test assessment of allowances paid with employment income depends on what the allowance is paid for and how often it is paid. Some allowances are treated as exempt income and do not need to be reported. If an allowance needs to be reported the customer must include the gross amount paid with their fortnightly employment income report.

Allowances that are paid for tasks that involve additional responsibility or inconvenient work conditions are assessed as employment income and need to be reported. Examples of these types of allowances are:

• Shift allowance
• Danger allowance
• First aid allowance

See Resources for more examples of allowances.

Allowances that are paid regularly throughout the year for ongoing work related expenses are exempt income and do not need to be reported. Examples of allowances for work related expenses that are generally paid on a regular basis are:

• Tool allowance
• Laundry allowance
• Working from home allowance

Allowances paid by an employer to cover a one-off or irregular work related expense are exempt income and do not need to be reported. Exception: If the allowance amount exceeds the expense incurred, the difference is assessed as employment income and needs to be reported. Examples of this type of allowance are:

• Travel allowance
• Meal allowance
• Fuel allowance

See Resources tab for more examples of allowances.

An allowance is not treated as employment income if:

• it is paid to a person where an employer/employee relationship does not exist, and
• the allowance is not directly in return for remunerative work undertaken, and does not represent back-pay

For example, the Salvation Army provides a Retired Officer Allowance and Long Service Allowance. These allowances are paid to a retired officer for recognition of past service prior to retirement. Payments are treated as ordinary income and are recorded on the Other Income (OIN) screen.

If STP data shows that a customer has had an allowance paid, they will be asked to check, confirm or change the pre-filled details. The allowance type will indicate if it needs to be included as assessable income for the reporting period.

More information about STP employment income details can be found in Resources at Single Touch Payroll (STP) Assessment of allowances paid with employment income.

Although an allowance may not be assessable for social security purposes, it may be taxable and must be included in a customer's adjusted taxable income for family assistance payments. Customers should check with the Australian Taxation Office (ATO) if their allowance needs to be declared for taxation purposes.