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danni2801(Newbie)Newbie
26 June 2024

I have been paying employees a meal and incidental allowance at the ATO rate and have not been withholding tax from it. Is this correct?

I have noticed that when I have gone to finalise their payment summaries this allowance is being shown in the allowances section but is then included in their taxable income and therefore they are required to pay tax on it. Is this correct? and if so should the employee be then claiming a deduction for this amount or should they be keeping receipts and claim a deduction for the actual expenses incurred?

I found this section on the ATO website that says if its equal or less than the ATO rate that I dont withhold tax and it is not to be included on their payment summary, only on their payslip. How do i show this on their payslip but not their payment summary?


Travel allowances | Australian Taxation Office (ato.gov.au)


Thanks!


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739 views
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PayrollDeanne(Taxicorn)Taxicorn
27 June 2024

Hiya @danni2801 👋


Yes, travel allowances that do not exceed the ATO rate and meet the conditions published annually in a Tax Determination (see TD 2024/3) are not taxed, superable or reportable.


It has been this way for as long as I've been doing payroll (decades, I'm OLD 👵)


Yes, if you make payments to your employee, you show it on the payslip. Think of the payslip like an itemised tax receipt! 🧾


Seek assistance from you payroll product provider to learn how to set up those payments to appear on your payslip but not in STP in your specific product. After all, both are just reports and what is required for one report is different from what is required for the other report.


Deanne

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Most helpful reply

PayrollDeanne(Taxicorn)Taxicorn
27 June 2024

Hiya @danni2801 👋


Yes, travel allowances that do not exceed the ATO rate and meet the conditions published annually in a Tax Determination (see TD 2024/3) are not taxed, superable or reportable.


It has been this way for as long as I've been doing payroll (decades, I'm OLD 👵)


Yes, if you make payments to your employee, you show it on the payslip. Think of the payslip like an itemised tax receipt! 🧾


Seek assistance from you payroll product provider to learn how to set up those payments to appear on your payslip but not in STP in your specific product. After all, both are just reports and what is required for one report is different from what is required for the other report.


Deanne

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Meal & Incidental Allowances- withholding tax or not- should this be shown on payment summary? | ATO Community