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Allowances are usually a specific amount paid in addition to an agreed salary, such as allowances for tools, uniforms and overtime.
All allowances paid to an employee are liable for payroll tax except for the exempt component of both the overnight accommodation and motor vehicle allowance or if they are a direct reimbursement against a receipt.
For more information, view Revenue ruling PTA 011 – Allowance and Reimbursements.
Overnight accommodation allowance
An overnight accommodation allowance is paid to an employee to cover temporary accommodation costs for a night’s absence from their usual place of residence.
This allowance, including meals and incidental expenses, is only liable for payroll tax if the payment exceeds the exempt rate of TBA a night.
Note: Temporary accommodation means for a continuous period of:
- no more than 21 days
- more than 21 days where the employee continues to maintain a domestic dwelling to accommodate the employee and/or their family.
For more information on overnight accommodation for truck drivers, view Revenue ruling PTA 024 – Overnight accommodation allowances paid to truck drivers.
Living away from home allowance
A living away from home allowance is paid to an employee who has moved and taken up temporary residence away from their usual place of residence so that they are able to carry out their employment duties at a new, temporary workplace.
This allowance is liable only if it exceeds the reasonable benefit limits under the Fringe Benefits Tax Assessment Act 1986.
Note: A living away from home allowance is commonly misinterpreted as an accommodation allowance.
Motor vehicle allowance
A motor vehicle allowance is paid to an employee to compensate them for any business use of their own private vehicle.
How can a motor allowance be paid?
A motor vehicle allowance can be paid in one of the following ways:
Per kilometre – A car expense payment paid per kilometre is not subject to payroll tax.
Flat amount, fixed amount or fixed amount plus a rate per kilometre – the allowance is liable for payroll tax if the payment exceeds the exempt component. You must keep records of the business kilometres travelled to claim the exempt component. If you have not kept records, the total allowance is liable.
You must record business kilometres using the continuous recording method or averaging method used by the Australian Taxation Office. The Chief Commissioner may approve another method and this approval must be in writing.
For information on real estate salespersons, view Revenue ruling PTA 025 – Motor vehicle allowance paid to real estate salespersons.
How do I calculate the exempt component?
The exempt component of a motor vehicle allowance is calculated using the following formula:
E = K x R
E = exempt component.
K = number of business kilometres travelled during the financial year.
R = the exempt rate of 77c per kilometre
For more information, view Revenue ruling PTA 005 v2 – Exempt Allowances: Motor Vehicle and Accommodation.
Previous exempt rates
To view the exempt rates for previous year's, visit our previous rates and thresholds page.