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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