Amounts you do and don't include
You must include all the income you receive during the income year as an employee in the engineering industry in your tax return, this includes:
- salary and wages, including cash or bonus payments
- allowances
- compensation and insurance payments – for example, payments made under an income protection insurance policy to replace salary and wages.
Don't include as income any reimbursements you receive.
Your income statement or payment summary will show all your salary, wages and allowances for the income year.
Allowances
You must include all allowances your employer reports on your income statement or payment summary as income in your tax return.
An allowance is where your employer pays you an amount as an estimate of costs you might incur:
- to help you pay for a work expense – for example, vehicle allowance
- as compensation for an aspect of your work such as working conditions or industry peculiarities – for example, disability allowance
- as an amount for having special duties, skills or qualifications – for example, first aid qualifications.
Your employer may not include some allowances on your income statement or payment summary. Find out about declaring income and claiming deductions for Allowances not on your income statement.
Allowances not on your income statement or payment summary
If you receive an allowance from your employer, it does not automatically mean you can claim a deduction.
Your employer may not include some allowances on your income statement or payment summary, you will find these amounts on your payslip. You don't need to declare these allowances as income in your tax return, unless you're claiming a deduction. Examples include travel allowances and overtime meal allowances.
If you spend the allowance amount on work expenses, you:
- don't include it as income in your tax return
- can't claim any deductions for the work expenses the allowance covers.
If you're not claiming a deduction, you don't need to keep any records of the amounts you spend.
If you spend your allowance on a deductible work-related expense, to claim a deduction you:
- include the allowance as income in your tax return
- include a claim for the work expenses you incur in your tax return
- must have records of your expenses.
If you can claim a deduction, the amount of the deduction is not usually the same amount as the allowance you have receive.
Allowances and claiming a deduction
The following table sets out allowances you may receive and when you can claim a deduction.
|
Reason for allowance |
Example of allowance type |
Deduction (Yes or No) |
|---|---|---|
|
Compensation for an aspect of your work that is unpleasant, special or dangerous or for industry peculiarities |
Height allowance Disability allowance |
No These allowances don't help you pay for deductible work-related expenses |
|
An amount for certain expenses |
Vehicle allowance |
Yes If you incur deductible expenses |
|
An amount for special skills |
A first aid certificate |
Yes If you incur deductible expenses |
Example: allowance assessable, no deduction allowable
Mitch is an aeronautical engineer. One of Mitch's duties involves checking aspects of large aircraft while they are being built and to do this, Mitch has to work on scaffolding. Mitch receives a height allowance from his employer when works on scaffolding.
At the end of the income year, his employer shows the allowance on his income statement. Mitch must declare the allowance as income in his tax return.
Mitch can't claim a deduction because he doesn't incur any deductible expenses. The allowance compensates Mitch for a dangerous aspect of his work. It isn't to help him pay for work-related expenses that Mitch might incur.
End of example
Example: allowance assessable, deduction allowable
Irene is a mechanical engineer. Irene's employer pays her a tool allowance of $650 each year. During the income year, Irene buys a digital force gauge for $764.
At the end of the income year, Irene's employer shows the tool allowance on her income statement.
Irene must declare the tool allowance of $650 as income in her tax return.
Irene can claim a deduction for the decline in value of the digital force gauge over its effective life.
End of exampleReimbursements
If your employer pays you the exact amount for expenses you incur (either before or after you incur them), the payment is a reimbursement.
A reimbursement isn't an allowance.
If your employer reimburses you for expenses you incur:
- you don't include the reimbursement as income in your tax return
- you can't claim a deduction for them.
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