Allowance - cents per kilometre

Jaime F

Can you please advise which Tax Tracking Type option should be used for a Cents per kilometre allowance that isn't taxable? Would it be 'None' or 'Allowance - Cents per Kilometre'?

Acctd4

Hi @Jaime F

When a Payroll Item is mapped to None, this means it is not reported (eg it does not appear on the Income Statement prev "Paymet Summary") Therefore, it should be mapped to "Allowance - Cents per kilometre"

Unfortunately, the ATO assumes that employers know exactly what travel is tax-deductible for every employee, when that employee does their tax return. Therefore, the above states that the employee has to declare the allowance as taxable BUT that you don't need to withhold any PAYG from it. The reasoning behind this is the assumption that the employee will simply "claim" their travel against it, to offset that liability.

The problem with this is that many travel allowances incorporate both deductible (eg between job sites) AND non-deductible (eg between home & the workplace) travel, which means the employee can end up with a tax bill if they're unable to offset (eg claim against) the full allowance amount received!

Therefore, I ALWAYS tax ALL allowances regardless - If the employee doesn't owe it, they will thank receive a (bigger) refund. If they do owe it, it minimises their chance of a tax bill 😊