Travel allowances

If you have employees that travel for work, you may be required to pay travel allowance to them.

What is a travel allowance?

A travel allowance is a payment made to an employee to cover expenses when that person travels for work. This money might be used to cover things like accommodation, food, drink and incidentals.

An allowance may be paid to an employee before or after they travel.

If an allowance is paid to an employee before they travel, the employee does not need to use all of the allowance.

Do I need to pay a travel allowance to my employees?

If your business is covered by a modern award or enterprise agreement, you should be aware that they usually contain some travel-related requirements.

For example, the Clerks Private Sector Award 2010 requires employers to pay a living away from home allowance, in certain circumstances.

Find the awards or agreements relevant to your business to make sure you know what requirements apply to your employees:

In some businesses, travel-related requirements may also be found in individual employment contracts, or workplace policies.

PAYG withholding and travel allowances

A travel allowance is assessable income to employees.

If you pay travel allowance to your employees, you should be aware that the Australian Taxation Office (ATO) decides on a reasonable travel allowance rate every year.

If the travel allowance you pay your employees is more than the ATO rate, you’ll have to withhold the tax on the difference. You’ll also need to include the total amount of the allowance on your employee’s payment summary in the allowance box, with an explanation.

There are some simple exceptions. Find out more about travel allowances and PAYG withholding on the ATO website.

Claiming travel allowances as business deductions

You can claim most expenses that are incurred in running your business as deductions, including salary, wages and allowances paid to your employees.

Find out more about claiming business deductions.

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