Amounts you do and don't include
You must include all the income you receive as a lawyer during the income year 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, mobile phone expenses
- as compensation for an aspect of your work such as working conditions or industry peculiarities – for example, working in a remote locality or being on stand-by
- 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 or payment summary.
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 |
Harassment contact officer allowance Stand-by 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
Penny is a solicitor. Penny's employer has asked her to take on the role of the Health and Safety officer for the office. Penny receives an allowance of $18.15 for each week she is in this role.
At the end of the income year, Penny's employer includes her total allowance of $943.80 on her income statement.
Penny must declare the allowance of $943.80 as income in her tax return.
Penny can't claim a deduction. The allowance compensates Penny for the additional role she performs. It is not to help cover any expenses that Penny might incur.
End of example
Example: allowance assessable, deduction allowable
Bronwyn is a law clerk. During the income year, Bronwyn uses her own car to travel from the office to the Court to drop off documents. Bronwyn's employer pays her 80c per kilometre when she uses her car for work purposes.
At the end of the year, her income statement shows she was paid an allowance of $256 for using her car for work (320 kms × $0.80 = $256).
Bronwyn must include the car allowance as income in her tax return.
Bronwyn can claim a deduction for the cost of using her car for work purposes. She can't claim the amount of the allowance she receives. Instead, she must calculate the amount of the deduction based on the records she keeps whenever she uses her own car for work purposes.
In the past year Bronwyn has kept a record of the work trips she did using her own car, but she doesn't keep a logbook. Her records show she used her car to travel 320 kms for work purposes.
As Bronwyn has not kept a logbook, she uses the cents per kilometre method to claim a deduction. The cents per kilometre method rate for the 2023–24 income year is 85c per kilometre.
Bronwyn claims a deduction of $272. Bronwyn calculates her deduction as 320 kms × $0.85 = $272.
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 for expenses you incur:
- you don't include the reimbursement as income in your tax return
- you can't claim a deduction for the expenses.
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