Allowances paid to employees are liable for payroll tax.
You may be able to claim an exemption up to a certain amount on:
A motor vehicle allowance is paid or payable to an employee to compensate them for any business use of their own private vehicle.
For real estate professionals, refer to Revenue Ruling PTA 025.
The allowance can be paid on a per kilometre basis, as a flat or fixed amount, or a combination of both.
Car expense payments paid per kilometre are not subject to payroll tax.
Generally, if the allowance is paid at a flat rate, the full amount is liable for payroll tax.
However, if you can produce records to verify the number of business kilometres travelled, an exempt component can be calculated and deducted. If you have not kept records, the total allowance is liable.
You must record business kilometres using either the continuous recording method or averaging method:
Driving Pty Ltd uses the averaging method to calculate John’s exempt kilometres for October 2018. John’s log book from 1 July 2018 to 23 September 2018 shows that he travelled 50,000km. The business portion was 30,000km. In October, John travels 20,000km in total and receives an allowance of $20,000.
If payment is a combination of a fixed amount plus a kilometre rate, the amount of the allowance that exceeds the exempt component is taxable.
|Allowance during the year|
|Total business kilometres 2018/19||10,000km|
|Rate per kilometre at 30 cents||$3,000|
|Total allowance paid||$11,000|
|Less exempt fringe benefit||$3,000|
|Exempt component (Total number of business kilometres during the financial year x the ATO exempt rate)||$6,800|
|Taxable portion of allowance (sub total - exempt component)||$1,200|
You can find out the ATO exempt rates for previous periods on the rates and thresholds page.
For examples, refer to our case studies page.
Overnight accommodation allowance
An overnight accommodation allowance is paid to cover the costs of temporary accommodation if an employee has to stay away from home as a consequence of employment.
Temporary accommodation, in this case, means accommodation for a continuous period of:
Overnight accommodation allowance is only subject to payroll tax if it exceeds the exempt rate.
|Period||Allowance per night|
|01/07/2018 to 30/06/2018||$278.05|
|01/07/2017 to 30/06/2018||$266.70|
|01/07/2016 to 30/06/2017||$257.95|
|01/07/2015 to 30/06/2016||$255.45|
|01/07/2014 to 30/06/2015||$253.45|
Different rates apply for truck drivers, read Revenue Ruling PTA 024.
Living away from home allowances (LAFHA) are fringe benefit. The value if LAFHA for payroll tax purposes is the value determined in line with the Fringe Benefit Tax Assessment Act.
If the allowance does not qualify as a LAFHA under the FBT Act, it will be treated the same as an overnight accommodation allowance.
For more information, read Revenue Ruling PTA 005v2.