A travel allowance is a payment made to an employee to cover accommodation, food, drink or incidental expenses they incur when they travel away from their home overnight in the course of their duties. Generally, allowances folded into an employee’s salary or wages are taxed as salary and wages and tax has to be withheld, unless an exception applies. An employer must include the amount of the travel allowance in the allowance box on the employee’s payment summary.
Tax does not have to be withheld from a travel allowance, which is paid to an employee to cover “travel expenses” incurred in the course of employment if the rate of allowance is within what the Tax Office considers reasonable. Amounts within the reasonable limits are not taxed and are not shown on the employee’s payment summary.
If you get paid an allowance for some travel expenses (including overtime meal allowances, and domestic and overseas travel allowances), you do not have to keep written evidence of your expenses provided your claim does not exceed the reasonable allowance amount the ATO sets for each year.
Reasonable overseas travel allowance amounts
The overseas allowances reasonable amounts stated in the ruling do not include an accommodation component (only meals and incidentals components are included). Allowances for overseas accommodation must always be taxed and included on the employee’s payment summary. Employees claiming a deduction for overseas accommodation must substantiate expenses.
Reasonable overtime meal allowance
Tax does not have to be withheld from an overtime meal allowance, which is paid under an industrial award, if the amount is not more than what the Tax Office considers reasonable. That amount is $30.05 for meal allowance expenses for the 2017/18 financial year ($29.40 in 2016/17). A deduction is not allowable for non-award overtime meal allowance.
Travel allowance for truck drivers
Amounts claimed up to the food and drink component only are to be considered reasonable for meal expenses of
employee truck drivers who are required to sleep away from home. For 2017/18 the daily rate is $55.30 per day.
If you have a query regarding work-related expense claims or require assistance with your tax returns contact one of our Tax Accountants on (02) 9223 9166 to discuss. Alternatively, you can submit an online enquiry form.