Reimbursements verses Allowances

As seen in Woopi News October 2025

Often clients say, no I can’t claim that because I receive an allowance, but that’s not how it works. An allowance is recorded as taxable income and a deduction can be claimed for the work related portion of the expense, so long as its directly related to earning your assessable income and it hasn’t been reimbursed by your employer. An allowance is not the same as a reimbursement.

Reimbursements are a direct repayment of the expense incurred. The employee pays for something, takes the receipt to their employer and employer reimburses them for the exact cost incurred. The reimbursement may show on a payslip, but it is not reported as assessable income on the employees Income Statement. As the employee has been fully reimbursed, no tax deduction can be claimed.

Allowances are predetermined amounts paid to employees. They may be paid to compensate the employee for estimated expenses, special skills, specific duties or difficult working conditions. Most allowances are reported as assessable income on the employees Income Statement. A tax deduction may be able to be claimed in relation to how the employee spent the allowance, but receiving an allowance doesn’t automatically make you entitled to claim a deduction.

• Car allowance – deductions may be claimed for work related kilometres or a percentage of actual expenses depending on the records kept
• Laundry allowance – a deduction may be claimed of up to $150 per year, based on $1 per load of laundry or 50c per load where it’s mixed with other items.
• Travel allowance – deductions may include flights, accommodation, or meals where you have travelled over night for work
• Overtime meal allowance – deductions may include the cost of meals when working overtime
• Tool allowance – deductions include to cost of individual tools to the value of $300 each or depreciation on tools over the value of $300 each

It’s important to note that a deduction can be claimed even if the employee doesn’t receive an allowance but with any deduction substantiation is key, receipts that clearly show what was purchased, diaries and logbooks for things like phone usage, working from home and car deductions are all necessary to substantiate every deduction.