Allowances & Reimbursements

Allowances & Reimbursements

Contents

Introduction

The reporting of all types of allowances has been reviewed and all allowances are now to be separately itemised, not just expense allowances that may have been deductible on the employee’s Individual Income Tax Return (IITR). This means that those allowances that used to be reported as Gross for the income type must now be separately itemised including wage-related and disability allowances such as height, dirt, higher duties, first aid allowance. This does not extend to shift penalties and loadings.

The Other Allowance type that required the reporting of the pay code description as a free text field has also been revisited and these descriptions should no longer be reported per pay code, but summarised to report as pre-defined categories.

The separately itemised allowances include the following types:

  1. CD (Cents per KM)
  2. AD (Award Transport Payments)
  3. LD (Laundry)
  4. MD (Overtime Meal Allowances)
  5. RD (Domestic or Overseas Travel Allowances and Overseas Accommodation Allowances)
  6. TD (Tool Allowances)
  7. KN (Tasks)
  8. QN (Qualifications/Certificates)
  9. OD (Other Allowances)
Note: reimbursements that are a precise amount that reimburses an expense, verifiable by receipts, which was (or will be) incurred by the payee in the course of their duties must not be reported.

Allowances defined in the Industrial Instruments

Industrial instruments identify allowances to be paid. Industrial instruments include the National Employment Standards (NES), Awards (Modern and State), Enterprise Agreements (ratified by the Fair Work Commission), Individual Contracts (common law contracts) and business policy. The instruments may identify payments as "allowances", as this is the employment classification of the payment.

Types of allowances included in the industrial instruments may include:

  • Wage-related allowances – such as for conditions of work, disability (adverse conditions), locations, qualifications, performing specific tasks, paid meal breaks, for special conditions or unconditional for within or outside the ordinary span of hours
  • Uniform allowances – such as for uniforms (employer or employee provided) and laundering uniforms and other clothing allowances
  • Tools and equipment allowances – to compensate employees for acquiring, maintaining and replacing their own tools or equipment to perform their job
  • Travel allowances – for overnight absences including travel time, accommodation, meals and incidental expenses, camping and to specific locations
  • Transport allowances – for part-day travel including the use of the employee’s private vehicle, fares, travel time and to specific locations

Allowances by Income Classification

Allowances must not be reported as income if they are classified as:

Reimbursements:

A precise amount that reimburses an expense, verifiable by receipts, which was (or will be) incurred by the payee in the course of their duties. It is not a reward for services by the employer and is incurred by the employee on behalf of the employer.

By reimbursing the expense to the employee, the expense is transferred from the payee to the payer and is subject to the FBT rules where the "otherwise deductible" rule may reduce the value. An allowance that is paid in advance and subject to acquittal will be treated as a reimbursement.

However, mileage reimbursement will always be an allowance as it is not precise, only an estimate of the expense, and for that reason is outside FBT.

The payee is not taxed on the reimbursement as it is not assessable income and is excluded salary or wages for superannuation guarantee purposes. It is not reported to the ATO as assessable income – via payment summaries, STP Phase 1 or STP Phase 2.

Fringe Benefits:

Like a reimbursement, as defined above, but where the payer pays the expense that is otherwise deductible on behalf of, or for the benefit of, the payee. The "otherwise deductible" rule is a mechanism within the FBT legislation that can allow the fringe benefit taxable value of an expense payment benefit provided to an employee to be reduced to nil, thereby removing the need for the payer to pay fringe benefits tax.

As for reimbursements, the fringe benefit must not be reported as income for the payee as it is not a payment to the payee. It is not subject to withholding as it is not assessable income and is excluded salary or wages for superannuation guarantee purposes.

LAFHA as defined in FBT legislation may be paid to some payees. Many industrial instruments refer to "living away from home allowance" but it is really a travel allowance. The LAFHA as defined in FBT legislation is subject to FBT and is not to be reported to the ATO.

Neither an expense paid on the payee’s behalf or a LAFHA as defined in the FBT legislation is reported to the ATO as assessable income – via STP.

Even though the industrial instrument may refer to the above payments as "allowances", the income classifications exclude them from consideration for PAYGW, superannuation guarantee and reporting.

Therefore, all other allowances to be considered for PAYGW, superannuation guarantee and reporting may be classified as either:

  • Services - allowances paid to employees to recognise or compensate for certain conditions relating to their employment due to site displacement, disability (adverse conditions), recognition of skill or qualification, additional duties, inconvenience, infringement on personal time or other reward for performing services. These allowances are not intended to cover any expense and are a genuine reward for performing services.
  • Expenses - allowances paid to an employee with a reasonable expectation that the employee will expend the money in the course of providing services. These expenses may be further classified as either:
    • Non-deductible – those expenses that are of a capital, private or domestic nature that have not been expended in gaining or producing their assessable income or are specifically not deductible (for example, entertainment expenses).
    • Deductible - the payee is expected to incur expenses up to the amount of the allowance. This is limited to the extent that the expense is incurred in gaining or producing their assessable income: for business purposes. These expenses may be able to be claimed as a tax deduction

For allowances that are categorised as services or non-deductible expenses, the PAYGW is as per salary and wages. For superannuation guarantee, these allowances are assessed on their relevance to the ordinary span of hours or outside the span of hours. Reporting of these allowances are:

  • ServicesAllowance Type KN (Task Allowances)
  • Non-deductible expenses – Allowance Type OD (Other Allowances) > Other Allowance Type Description: ND Non-deductible

Methodology for Expense Assessment

For allowances that are categorised as deductible expenses, the following assessment applies:

  • PAYGW:
    • ATO measures (reasonable rates and/or limits defined) – no PAYGW applies
    • In excess of the ATO measures – PAYGW applies only to the amount in excess of the rates and/or limits
    • No measures defined by the ATO – PAYGW applies to the full amount
  • Superannuation Guarantee:
    • ATO measures (reasonable rates and/or limits defined) – excluded salary and wages
    • In excess of the ATO measures or no measures defined by the ATO – the payer must assess if the payee will fully expend the money in the course of providing their services. If the assessment is that the monies will be fully expended, it is excluded salary and wages. However, if the payer assesses the monies are not to be or likely to be expended in full, the full amount is salary and wages. With relevance to the ordinary span of hours, the payer must determine if it is also ordinary time earnings.
  • Reporting – the types of allowances to be reported are defined below. The overarching principle for reporting allowances against these specific types (not including other allowances) is that they must be deductible expense allowances, unless stated otherwise.

Allowance Types

The values permissible for the allowance type codes are:

CD (Cents per KM)

Deductible expense allowances that define a set rate (mileage) for each kilometre travelled for business purposes that represents the vehicle running costs, including registration, fuel, servicing, insurance and depreciation into account, where:

  1. Business purposes – refers to the incurrence of the expense in gaining or producing assessable income, considering if the travel occurs on work time, at the direction of the payer, within the duties of employment or engagement, is relevant to the practical demands of carrying out the work duties and the travel is requested by the payer to be undertaken. For example:
    1. Attending work-related conferences or meetings away from the regular place of work
    2. Travel directly between two separate places of employment/engagement if neither is the home of the payee
    3. Travel between the regular and alternative place of work
    4. Performing itinerant work – shifting places of employment/engagement
    5. But excluding any travel between the payee’s home and place of work unless it is a home-based business and the trip was for business purposes or if the payee is required by the payer to carry bulky tools or equipment or unless the payee satisfies on call and standby arrangements
    6. If the cents per kilometre allowance does not satisfy the business purposes test, it is deemed to be for private travel and is classified as a Non-deductible expense and should be assessed for PAYGW and super guarantee purposes as such. This type of non-deductible expense must be reported as OD (Other allowance) > ND Non-deductible.
      1. Example of business purpose - clause 13.1 of the MA000153 Australian Government Industry Award 2016
      2. Example of private purpose – clause 18.6(b)(ii) of the MA000025 Electrical, Electronic and Communications Contracting Award 2020 for travel back to the workplace, from home or elsewhere, to perform overtime after having left the workplace
  2. Vehicle – refers to a car. However, for other transport, such as if:
    1. The travel for business purposes is undertaken in other vehicles such as motorcycles or vehicles
    2. Then the cents per kilometre allowance does not satisfy the vehicle definition test and any amounts paid to the payee in these circumstances are to be reported as OD (Other Allowance) > V1 Private Vehicle.
    3. Importantly, this type of "other vehicle" allowance does not form part of the ATO measure (that is limited to business purposes and vehicles) and is therefore treated as a deductible expense – not measured by the ATO as per 2.6.4.1 Assessment of Deductible Expenses.
      1. Example of other-vehicle – clause 20.4(a)(ii) of the MA000111 Fire Fighting Industry Award 2020 for a cents/km allowance paid for a business purpose of travel using a motorcycle rather than a vehicle
  3. ATO Measure – ATO set a measure for this deductible expense, based upon a reasonable rate of c/km in a Vehicle and a limit to the business kilometres (kilometres travelled for Business purposes). The rate and limit is reviewed regularly and published on the ATO website. This measure is used to determine the PAYGW and super guarantee on the allowance, as per section 2.6.4.1 Assessment of Deductible Expenses.
  • This should not include any cents per kilometre allowances that are paid for travel between the payee’s home and place of work unless it is a home-based business and the trip was for business purposes. Mileage paid for private purposes is a non-deductible expense for PAYGW and super guarantee purposes and are to be reported as OD (Other Allowances) > ND Non-deductible
  • Mileage paid for other vehicles is a deductible expense that is to be treated as "no measures defined by the ATO" for PAYGW and super guarantee purposes and is to be reported as OD (Other Allowances) > V1 Private Vehicle

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The following table provides an overview on the assessment for PAYGW and superannuation guarantee for cents/km deductible expenses for business purposes using a vehicle:

Allowance Income Classification Subject to PAYGW Include in OTE
Rate up to and including the ATO reasonable amount and up to the limit of 5,000 business km Amount up to and including ATO rate and limit is a Deductible Expense – Up to ATO Measure No PAYGW Excluded S&W
(Not OTE, Not S&W)
Rate up to and including the ATO reasonable amount and in excess of the limit of 5,000 business km Amount up to and including the ATO rate and limit is a Deductible Expense – Up to ATO Measure No PAYGW Payer assesses if fully expended (Excluded S&W: Not OTE, Not S&W) else full amount of allowance is S&W and may also be OTE
Amount in excess of the ATO limit is a Deductible Expense – In Excess of ATO Measure PAYGW on Excess Only
Rate in excess of the ATO reasonable amount and up to the limit of 5,000 business km Amount up to and including the ATO rate and limit is a Deductible Expense – Up to ATO Measure No PAYGW Payer assesses if fully expended (Excluded S&W: Not OTE, Not S&W) else full amount of allowance is S&W and may also be OTE
Amount in excess of the ATO rate and limit is a Deductible Expense – In Excess of ATO Measure PAYGW on Excess Only
Rate in excess of the ATO reasonable amount and in excess of the limit of 5,000 business km Amount up to and including the ATO rate and limit is a Deductible Expense – Up to ATO Measure No PAYGW Payer assesses if fully expended (Excluded S&W: Not OTE, Not S&W) else full amount of allowance is S&W and may also be OTE
Amount in excess of the ATO rate and limit is a Deductible Expense – In Excess of ATO Measure PAYGW on Excess Only

 

AD (Award Transport Payments)

Deductible expense allowances for the total rate (standing charge) specified in an industrial instrument to cover the cost of transport (excluding travel or cents per kilometre reported as other separately itemised allowances) for business purposes, where:

  1. Total rate (standing charge) – refers to a fixed dollar amount per unit of time (such as per day or per week), to cover the cost of transport, excluding travel or cents per kilometre reported as other separately itemised allowances. This allowance is similar to c/km, except that the award transport payment measures time (per day or week) rather than the distance travelled (per kilometre) for the c/km allowance. It is an average measure of the cost over time.
    1. Example of total rate (standing charge)- clause 18.3(e)(i) of the MA000053 Stevedoring Industry Award 2020
  2. Business purposes – refers as per the previous section CD (Cents per Kilometre)
  3. ATO Measure - ATO set a measure for this deductible expense as the traceability of the current award to an award in force on 29 October 1986.
    1. If the allowance can be traced back to the source award of 29 October 1986, then the award transport payment is not subject to withholding.
    2. This measure is used to determine the PAYGW and super guarantee on the allowance, as per section 2.6.4.1 Assessment of Deductible Expenses.
    3. If this measure cannot be met by the payer (traceability of the current industrial instrument to the historical award in force on 29/10/1986) then the entire amount of the award transport payment is to be classified as a Deductible expense – "no measures defined by the ATO".
      1. The allowance must therefore be assessed for PAYGW and super guarantee as per section 2.6.4.1 Assessment of Deductible Expenses and reported as OD (Other Allowance) > T1 Transport/Fares
      2. Example of both travel (total rate) and car expenses (c/km) - clause 17.2 of the MA000106 Real Estate Industry Award 2020
    4. Award transport payments for private purposes is a non-deductible expense for PAYGW and super guarantee purposes and are to be reported as OD (Other Allowances) > ND Non-deductible

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LD (Laundry)

Deductible expense allowances for washing, drying and/or ironing uniforms required for business purposes. These allowances are typically paid as a regular rate for each week of work or services performed and cannot include dry cleaning expenses or reimbursements.

  1. Uniforms – refer to the following categories of clothing that are not permitted for those paid exempt foreign income:
    1. Compulsory uniform – unique and distinctive to identify the employer with a strictly enforced policy that makes it compulsory for the uniform to be worn at work
    2. Non-compulsory uniform – only if the design of the uniform has been entered on the Register of Approved Occupational Clothing
    3. Occupation-specific clothing – that isn’t every day in nature and allows the public to easily recognise the occupation
    4. Protective clothing and footwear – to protect against the risk of illness or injury posed by the activities undertaken to earn the income
    5. Example of laundry allowance – clause 19.3(c) of the MA000004 General Retail Industry Award 2020
  2. Business purposes– refers to only the uniforms listed in items a to d above.
    1. Laundering of other clothing items is deemed to be for private purposes and is classified as a Non-deductible expense and should be assessed for PAYGW and super guarantee purposes as such. This type of non-deductible expense must be reported as OD (Other allowance) > ND Non-deductible.
    2. However, there may be limited circumstances for deductibility of conventional clothing if there is sufficient connection between the clothing and income earning activities. In those circumstances, it is classified as Deductible – "no measures defined by the ATO", assessed for PAYGW and super guarantee as per section 2.6.4.1 Assessment of Deductible Expenses and reported as OD (Other Allowance) > G1 General
  3. ATO Measure - ATO set a measure for this deductible expense, based upon the Commissioner’s estimate ($1/ isolated load, 50¢/mixed load) of payee claims for laundry of approved uniforms up to a fixed limit, currently $150, for Business purposes). The limit is reviewed periodically. This measure is used to determine the PAYGW and super guarantee on the allowance.

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MD (Overtime Meal Allowances)

Deductible expense allowances defined in an industrial instrument that are in excess of the ATO reasonable amount, paid to compensate the payee for meals consumed during meal breaks connected with overtime worked.

  1. Meal breaks connected with overtime worked – industrial instruments may specify a range of paid meal breaks (such as for shift work) to compensate the payee for the additional costs for food and drink, but this deductible allowance only applies to paid overtime meal breaks.
    1. Example of paid overtime meal allowance – clause 26.4 of the MA000009 Hospitality Industry (General) Award 2020
  2. ATO Measure - ATO set a measure for this deductible expense in an annual tax determination each financial year. There is an exception to the reporting of this type of allowance, as the amounts up to the ATO reasonable amount are not to be reported as income. The payee claims for their actual expenses, up to the reasonable amount, do not require substantiation. This measure is used to determine the PAYGW and super guarantee on the allowance, as per section 2.6.4.1 Assessment of Deductible Expenses.

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RD (Domestic or Overseas Travel Allowances and Overseas Accommodation Allowances)

Deductible expense allowances that are in excess of the ATO reasonable amount (for domestic or overseas travel), undertaken for business purposes, which are intended to compensate employees who are required to sleep away from home. It is not a reimbursement of actual expenses, but a reasonable estimate to cover costs including meals, accommodation and incidental expenses. All overseas accommodation allowances are to be reported. Where:

  1. Domestic or overseas travel – refers to Australia and its island territories (Christmas Island, Cocos Islands, Norfolk Island, Heard and McDonald Islands) as "domestic" and all other countries as "overseas".
  2. Business purposes – refers to the travel being undertaken in the course of gaining or producing assessable income and is relevant to employer requirements.
    1. All other purposes are deemed to be for private purposes and are classified as a Non-deductible expense and should be assessed for PAYGW and super guarantee purposes as such. This type of non-deductible expense must be reported as OD (Other allowance) > ND Non-deductible.
    2. If travel includes both business and personal purposes, only the allowance associated with business matters is to be reported.
  3. Employees – refers only to the common law definition of employee
  4. Sleep away from home – refers only to temporary stays away from the employee’s ordinary place of residence for their normal sleep or rest period, recognising more than just "overnight" absences due to the different shifts that the employee may work. It does not include any shifts where an employee sleeps at a workplace near their home as part of their duties to stand-by for work. Longer durations of temporary residence may be living away from home rather than simply traveling away from home.
  5. Overseas accommodation – refers to any monies paid to cover the cost of commercial establishments.
  6. ATO Measure – ATO set a measure for only the domestic or overseas travel allowance, as a deductible expense, in an annual tax determination each financial year. There is an exception to the reporting of this type of allowance, as the amounts up to the ATO reasonable amount are not to be reported as income. The payee claims for their actual expenses, up to the reasonable amount, do not require substantiation. This measure is used to determine the PAYGW and super guarantee on the allowance.
    1. Different measures are defined for employees, based upon their annual salary, for specific meals, domestic accommodation, incidentals and locations.
    2. Different measures are defined within the annual tax determinations for employee truck drivers. There is a separate rate for office holders covered by the Remuneration Tribunal or Federal members of Parliament to address their different travel arrangements.
    3. If employees are not required to be absent from their rest period at home, it does not satisfy the condition and is part-day travel only. Part day travel is classified as a Non-deductible expense and should be assessed for PAYGW and super guarantee purposes as such. This type of non-deductible expense must be reported as OD (Other allowance) > ND Non-deductible.
    4. Overseas accommodation is not included in the ATO measure, so is classified as Deductible – "no measures defined by the ATO", assessed for PAYGW and super guarantee and must be reported as OD (Other allowance) > G1 General.

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TD (Tool Allowances) (New)

Deductible expense allowances to compensate an employee who is required to provide their own tools or equipment for business purposes. This allowance was formerly required to be reported under "Other Allowances" with a description of the allowance type. This is now required to be reported separately, where:

  1. Required to provide – refers to the employee buying the tools or equipment, rather than the employer providing them to the employee, in order to perform their job. The allowance covers the cost or purchase and maintenance of the tools or equipment.
  2. Tools or equipment – refers to the items needed to perform the work or services that may include items such as chefs’ knives, divers’ oxygen tanks, skydivers’ parachutes, trade tools, digital devices.
    1. Example of tool allowance – clause 17.4(a) of the MA000101 Gardening and Landscaping Services Award 2020
  3. Business purposes – refers to the work or service being undertaken in the course of gaining or producing assessable income.
  4. There is no ATO measure for these types of deductible expenses that are classified as Deductible – "no measures defined by the ATO", assessed for PAYGW and super guarantee. The taxpayer may claim work-related expenses on their IITR with relevant substantiation.

KN (Tasks) (New)

Services allowances that are paid to a payee to compensate for specific tasks or activities performed that involve additional responsibilities, inconvenience or efforts above the base rate of pay. For example, higher duties allowance, confined spaces allowance, dirty work, height money, first aid etcetera. These allowances were formerly included in Taxable Gross but are now required to be reported separately.

Examples of allowances whose purpose is to compensate for work or services performed are:

  1. Supplemental – allowances that have been historically paid to supplement the basic wage, such as all-purpose and industry allowances.
    1. Example of supplemental allowances – clause 24.1 of the MA000029 Joinery and Building Trades Award 2010
  2. Disability – allowances to compensate for adverse conditions above the base rate that are typically claimed when the adverse activity is undertaken, such as for having to suffer excessive fumes, noise, temperature, confined spaces or perform undesirable tasks.
    1. Example of disability allowances – clause 20.2(b) of the MA000048 Airline Operations – Ground Staff Award 2020
  3. Tasks and activities – allowances for performing additional or specific duties that may require additional responsibilities, such as for supervising or managing other staff or being on standby to perform first aid. Also includes location or district allowances paid to compensate for working in remote locations.
    1. Example of tasks and activities – clause 17.7 of the MA000022 Cleaning Services Award 2020
  4. Skill level – allowances for recognition of a certain level of competency that demonstrates additional skills and possibly associated qualifications, such as for driving or operating specific machinery or equipment, however, these allowances are paid for recognition of the skill level required and is not intended to cover any expense of obtaining the qualification.
    1. Example of tasks and activities – clause 26.1(b) of the MA000073 Food, Beverage and Tobacco Manufacturing Award 2010

There may be an extensive range of allowances that compensate employees for their work or services, however, these are detailed in the industrial instruments, along with details of their purpose and the conditions for which they are intended to compensate.

QN (Qualifications/Certificates) (New)

Deductible expense allowances that are paid for maintaining a qualification, which is evidenced by a certificate, licence or similar, required to perform the work or services. For example, allowances to cover registration fees, insurance, licence fees, which are expected to be expended to maintain a requirement of the job. Where:

  1. Qualification – refers to allowances to cover registration fees to maintain a recognised and authorised certificate, license or similar, to perform the job and to maintain the formal recognition of the qualification.
    1. Example of a qualification allowance – clause 18.3(f) of the MA000098 Ambulance and Patient Transport Industry Award 2020
  2. Insurance – refers to allowances to cover financial protection fees for those professions that have mandatory insurance coverage requirements to perform the job.
    1. Example of insurance allowance – clause 20.3(c) of the MA000046 Air Pilots Award 2020
  3. Licence fees – refers to an allowance to cover regulatory licence fees that are mandatory in order to perform the work.
    1. Examples of licence fees – clause 19.12 of the MA000004 General Retail Industry Award 2020
  4. There is no ATO measure for these types of deductible expenses that are classified as Deductible – "no measures defined by the ATO", assessed for PAYGW and super guarantee as per section 2.6.4.1 Assessment of Deductible Expenses. The taxpayer may claim work-related expenses on their IITR with relevant substantiation.

OD (Other Allowances)

Expense allowances that are not otherwise separately itemised:

  • Deductible expenses – for those expenses not specifically addressed in the above allowance types. For example: car allowances (other than cents per kilometre), uniform allowances etcetera.
  • Non-deductible expenses – for those expenses that are for private use. For example: cents per kilometre for travel between home and the regular place of work, laundry allowances for conventional clothing.

In STP Phase 1, the Other Allowance Type Description was required to be provided if the Allowance Type was for OTHER allowances. In CloudPayroll, the pay element description was used. Whilst the Other Allowance Type Description is still required to be provided in STP Phase 2, there are changes to the way these descriptions are to be reported.

Rather than providing the description of the pay element for Other Allowance Description, the ATO-preferred method is to report the category of the other allowances, using ATO pre-determined category codes. This will allow the ATO to assist the payee when completing their IITR.

Issues in STP Phase 1

Analytics on the descriptions that have been reported since the commencement of STP show that there are many "other allowances" that were:

  • Deductible expenses - that may now be reported as separately itemised allowances, such as for TD Tool Allowance or QN Qualifications Allowance
  • Reimbursements - that are not reportable income and therefore invalid to be reported as other allowances
  • Wage-related allowances - that are now classified as Services that are not expense allowances but should have formerly been reported as Gross. These allowances are now to be reported as allowance type KN Task Allowances.
  • Not allowances - but were other specific payments to be included in aggregated gross, such as bonuses, which may now be reported for disaggregated gross as Payment Type – Bonuses and Commissions or other payment types
  • Changed - appropriate other allowances, but the pay element descriptions were changed in payroll over time, preventing government analysis of the continuity of payments. It was unclear if a former allowance had ceased and a new lump sum allowance was paid, or if there was a correlation between the different descriptions. For example, for Services Australia to calculate period amounts from the Other Allowance Descriptions, if the pay code was changed by the payer, the period amounts could not be calculated correctly.

Other Allowance Description Categories

The other allowance description categories have been determined by analysing the current descriptions that have been reported via STP and eliminating those that can be assigned to new or existing separately itemised allowances.

The Other Allowance Type Description categories are:

From Date To Date Category Code Category Description
01/07/2016 31/12/9999 ND  NON-DEDUCTIBLE
01/07/2016 31/12/9999 U1 UNIFORM
01/07/2016 31/12/9999 V1 PRIVATE VEHICLE
01/07/2016 31/12/9999 H1 HOME OFFICE
01/07/2016 31/12/9999 T1 TRANSPORT/FARES
01/07/2016 31/12/9999 G1 GENERAL

 

ND Non-Deductible

Non-deductible expense allowances where the PAYGW is as per salary and wages. For superannuation guarantee purposes, these allowances are assessed on their relevance to the ordinary span of hours or outside the span of hours. This category includes those allowances from the separately itemised allowances that have failed to meet the conditions of those allowances and are non-deductible, such as for:

U1 Uniform

Deductible expenses – "no measures defined by the ATO", assessed for PAYGW and super guarantee as per section Methodology for Expense Assessment. Only deductible expenses for:

  • Approved uniforms may be reported under this category, as defined in LD (Laundry Allowance)
  • This must not include any reimbursements for uniforms but must represent allowances paid to employees for the employee to purchase the uniforms. The employee may claim their actual expenses on their annual IITR, with relevant substantiation.
  • Example of uniform allowance: clause B.1.1(d) of the MA000047 Aircraft Cabin Crew Award 2020
V1 Private Vehicle

Deductible expenses – "no measures defined by the ATO", assessed for PAYGW and super guarantee as per section Methodology for Expense Assessment. Only deductible expenses for:

H1 Home Office

Deductible expenses – "no measures defined by the ATO", assessed for PAYGW and super guarantee as per section Methodology for Expense Assessment. Only deductible expenses for:

  • Working from home allowances that may be paid for the purpose of purchasing equipment or connecting to communication services
  • These types of allowances must not include specific allowances paid for the purchase and maintenance of specific tools and equipment that would be reported at TD (Tool Allowances)
T1 Transport/Fares

Deductible expenses – "no measures defined by the ATO", assessed for PAYGW and super guarantee as per section Methodology for Expense Assessment. Only deductible expenses for:

  • AD (Award Transport Payments) where the historical award cannot be sourced from the current award transport payment
  • Fares allowances paid to compensate the transport costs for business purposes that isn’t sourced from an award, such as an individual contract for services or business policy.
G1 General

Deductible expenses – "no measures defined by the ATO", assessed for PAYGW and super guarantee as per section Methodology for Expense Assessment. Only deductible expenses for:

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      • "Rate Amount" from Payment Details
      • "Rate Amount" less persons Salary
      • "Rate Amount" times Hours Paid (except Annual Leave)
      • GST Inclusive "Rate Amount" from Payment Details
      • Per annum "Rate Amount" from Payment Details
      • "Rate Amount" times Total Hours Paid
      • "Rate Amount" times Hours Worked
      • "Rate Amount" times Ordinary Hours Paid (incl. Leave)
      • "Rate Amount" times Hours Worked (less PH)
Note: This option is also used when ad-hoc payments are made that vary each time they are entered. In that case, enter 0.0 in the Rate Amount. You can then enter the actual rate to pay when entering a timesheet. (e.g. MVA - Motor Vehicle Allowance).
    1. For a calculation that depends on a percentage of a person's earnings, select the appropriate percentage calculation rule from the list, and enter the actual percentage in the Rate Amount box. (e.g. LL17.5 - Leave Loading 17.5%).
      • Percentage of Accumulated Value (select the appropriate calculation accumulator)
      • use a Percentage of Holiday Pay Liable Earnings
      • Percentage of Hourly Earnings (incl. Leave)
      • GST Percentage of Taxable Earnings
      • Percentage of RDO Liable Earnings
    2. For a calculation that depends on other criteria, select the relevant rule.
      • Rate based on a Custom Field
      • Rate based on Length of Service
      • Rate based on Service times Hours Paid (except Leave)
      • Rate based on Tax YTD Quantity
      • Rate based on Age
      • Rate based on custom field times Hours Worked
      • Rate based on custom field times Total Hours Paid
      • Rate based on custom field times Ordinary Hours Worked (less PH)
      • Rate based on Pay Scale
  • Rate Amount: This entry depends on the Rate Type selected (above).
    1. For a Fixed Amount, enter the actual rate to pay this payment at. Alternatively, enter 0.0 if the amount is to keyed when entering timesheets.
    2. For a Percentage based rate type, enter the percentage to apply, (e.g. enter 6.5 for 6.5%)
  • Priority: Leave this blank, and an appropriate priority will be generated for you. (You will only rarely have to change the default priority).
    The priority determines the order in which payments are calculated, paid and displayed on timesheets and payslips. Often this order isn't important, but sometimes payment calculations depend on other payments in the same timesheet. (e.g. a payment that is calculated on a percentage of Taxable Earnings must be calculated after all Taxable Earnings have been calculated).

Payment Type

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  • Liable Earnings: Tick all that apply to this payment type.
    • Accumulates into Lump E: Tick if this payment is for back payments relating to more than 12 months prior.
  • Earnings Type: Select the relevant earnings type
    • Salary/Wages: Select the appropriate earnings type to report this payment in the appropriate place on the Payroll Control, Payroll Hours and Payroll Tax reports as well as reporting to the ATO via STP. All Salary/Wages types are hourly types that can accrue leave hours. Do not use any of these for allowances and reimbursements.
      • Ordinary Time: Reports as Gross Payments via STP Phase 2
      • Overtime: Reports as Overtime via STP Phase 2
      • Penal Time: Reports as Gross Payments via STP Phase 2
    • Allowance: Select the appropriate option. This largely determines how the payment is taxed, but it also affects how it is presented on reports, including the Payroll Control and Payroll Tax reports as well as reporting to the ATO via STP.
      • Taxable: Use if your allowance requires PAYG to be withheld. This can be used for reportable allowances.
      • Overtime Allowance: Use for allowances that should be reported as Overtime.
      • Directors' Fees: Use for payments that are related to Directors' Fees.
      • Leave Loading: Use for leave loading payments.
      • Bonus: Use for bonus payments.
      • Overtime Bonus: Use for bonus payments relating to overtime.
      • Commission: Use for commission payments.
      • Overtime Commission: Use for commission payments relating to overtime.
      • Back Payment: Use for back payments that were meant to be paid in a prior period.
      • Overtime Backpay: Use for back payments relating to overtime.
      • Return To Work (Lump W): Use for return to work payments.
      • Termination (ETP): Use for Employment Termination Payments (ETPs) that lump sum D should be calculated for if the termination reason is RedundancyInvalidity or Early Retirement.
      • Termination (ETP)-No Lump D: Use for Employment Termination Payments (ETPs) that lump sum D should never be calculated.
      • Tax-Free ETP: Use for any tax-free components of ETPs that are either related to employment before 1 July 1983 or Invalidity.
      • Non-Taxable: Use if your allowance does not require PAYG to be withheld. This can be used for reportable allowances or reimbursements.
    • Reducing Balance Payment: Select if you would like to set a reducing balance amount to the payment where it will stop automatically once the balance amount has been paid.
    • Payable on Termination Pay: Select if a person should be paid out the leave liability in a termination pay.
    • Reimbursements (And other exclusions from STP): Use for reimbursements. This can only be selected for Non-Taxable Allowances that are not Itemised on Tax Reporting.
    • Itemised on Tax Reporting: Select for all Taxable or Non-Taxable allowances (unless the taxable allowances are relating to shift loadings or penalties).
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      • Other Allowance Type: If OD - Other Allowances is selected, select an Other Allowance Type.
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      • Allow $0 allowance to be submitted through STP: Only select for government related reporting such as JobKeeper/JobMaker payments. This can only be selected with Other Allowance Type of Use element description (not recommended).
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