Tax Deductions, Employer Reimbursements and Allowances

(last updated 26/03/2014) 

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Workers are often remunerated by their employer for various work related costs they incurred in the performance of their work. But did you know the tax consequences can be different where the receipt is either a reimbursement or an allowance.

The tax office view is as follows:
  • If your employer or any other person reimburses you for expenses you have actually incurred, the payment is called a reimbursement. ==> no tax consequences.
  • You cannot claim a deduction for expenses you incur if those expenses are reimbursed to you by your employer – you do not include a reimbursement, or the related expense, on your tax return.
  • An allowance is not considered to be a reimbursement and is assessable income. For more details on allowances see our checklist on eTax and Assessable Income.
  • If you claim your motor vehicle expenses from your employer using the cents per kilometre method, the amount you receive is considered to be an allowance.
  • Regardless of the amount of an allowance you receive, you can only claim a deduction for the expense you paid. That is, if you paid $80 in work-related expenses and you received a $100 allowance for those expenses, you can still only claim $80. For more details on deductions see our checklist on eTax and Allowable Deductions.

E-tax Return

See these posts with tips, calculators and checklists to help you prepare your eTax Return (and get a better refund) with less hassle:
For help with your eTax return see our eTax Return Checklist.

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Copyright 2014. My Tax Zone.