Allowance Items

(from the ATO's Business Implementation Guide)

Separately itemised allowances were formerly only permitted for the Individual Non-Business (Salary and Wages) income type. These allowances have now been extended to be reported for all Individual Non-Business income types. They are not permitted to be reported for Business Personal Services income types.

Many allowances were previously included and reported as Employee Gross Pay. Now, all allowances are to be separately itemised. This includes wage-related and disability allowances such as height, dirt, higher duties, first aid allowance.

• CD (Cents per KM) – deductible expense allowances that define a set rate for each kilometre travelled for business purposes that represents the vehicle running costs, including registration, fuel, servicing, insurance and depreciation into account

• This should not include any cents per kilometre allowances that are paid for travel between the Payees 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) > Other Allowance Type Description: 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) > Other Allowance Type Description V1 Private Vehicle
  
  

• AD (Award Transport Payments) – deductible expense allowances for the total rate 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, as defined in section 900-220 of the Income Tax Assessment Act 1997

• The current award transport payment must be traceable to an award in force on 29 October 1986 (this is the ATO measure for the rate and/or limit for PAYGW purposes)

• If the award transport payment cannot be traced back to the historical award, it 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) > Other Allowance Type Description V1 Private Vehicle
• 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) > Other Allowance Type Description: ND Non-deductible
  
  

• 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

• Uniforms refers to the approved categories of clothing defined by the ATO
• There may be limited circumstances for deductibility of conventional clothing if there is sufficient connection between the clothing and income earning activities. If so, it 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) > Other Allowance Type Description G1 General
• Laundering of other clothing items is a non-deductible expense for PAYGW and super guarantee purposes and is to be reported as OD (Other Allowances) > Other Allowance Type Description: ND Non-deductible
  
  
  

• 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

• RD (Domestic or Overseas Travel Allowances and Overseas Accommodation Allowances) – deductible expense allowances that are in excess of the ATO reasonable allowances 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

• TD (Tool Allowances) (New) – deductible expense allowances to compensate a Payee who is required to provide their own tools or equipment to perform work or services for the payer. For example: chef’s knives, divers’ tanks, trade tools, phone allowances. 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

• KN (Tasks) (New) – service 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 Employee Gross Pay but are now required to be reported separately. Expense allowances cannot be reported as this allowance type

• QN (Qualifications/Certificates) (New) – deductible expense allowances that are paid for maintaining a qualification that is evidenced by a certificate, licence or similar. For example; allowances to cover registration fees, insurance, licence fees etcetera that are expected to be expended to maintain a requirement of the job.  

• OD (Other Allowances) – any 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

• Rather than providing the description of the pay code for Other Allowance Description, the ATO-preferred method is to report the category of other allowances, using pre-determined category descriptions. This will allow the ATO to assist the Payee when completing their IITR.
  
  The ATO recommends the following:
• ND for Non-Deductible allowances,
• U1 for Uniform related allowances,
• V1 for Private Vehicle,
• H1 for Home Office related allowances,
• T1 for Transport/Fares related allowances, or
• G1 for General allowances.

Use these codes followed by a description of the allowance. For example is reporting a Footwear allowance for a construction employee use 'U1 Footwear'

See ATO's Employers Guide for Allowances here

See ATO's Common Questions and Mistakes - Allowance here