Private ruling: Allowance versus reimbursement
Date of advice: 5 November 2025
Published: 22 December 2025
Ruling period: Year ended DD MM YY
Date scheme commenced: DD MM YY

Ruling: Q1: Are the payments you receive from your employer that are cents/kilometre payments for actual kilometres travelled a reimbursement? | A1: No. | Q2: Is the occupation A approved payment you receive from your employer travel to and from your client's home non-assessable income? | A2: No. | Q3: If question 2 is no, then is the amount deductible in the income year it is paid to you? | A3: No.

Relevant facts and circumstances: You are employed as occupation A, providing services A to your client in their own home. You are employed under the relevant industry award. You travel to and from your client's home each working day, a trip that is approximately XX km each way. You also use your own vehicle to transport your client locally. Your employer uses a software package into which you enter all the actual kilometres you travel. Your employer then pays you for the actual kilometres travelled at the cents per kilometre rate specified in the award of $XX/km. You are paid both for the kilometres travelled when you transport your client locally, and for the kilometres to and from your client's home which is your workplace. The payment for the kilometres travelled to and from your client's home was requested by you and negotiated with your client's services provider. Your employer reports these payments as cents per kilometre allowances on your income statement. On your payslip and income statement they are reported separately due to the varied withholding rate for kilometres travelled up to xx kms and kilometres travelled in excess of XXkms.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 6-5 | Income Tax Assessment Act 1997 section 8-1

Reasons for decision: Detailed Reasoning - Payments as allowances: Although the amount you are paid is dependent on the number of kilometres you travel, you are paid a predetermined amount per kilometre. The amount is paid to cover the estimated expenses you will incur using your own car such as petrol and wear and tear. You are not compensated exactly for these expenses. Taxation Ruling TR 92/15: Income tax and fringe benefits tax: the difference between an allowance and a reimbursement, details that an allowance is when a person is paid a pre-determined amount to cover an estimated expense. A reimbursement is where a person is compensated exactly for the expense incurred. Providing an allowance equal to cents per kilometre is not a reimbursement because generally the actual expense for travel would include the actual cost of wear and tear on the vehicle, as well as the actual cost of fuel which would vary as fuel prices vary. A cents per kilometre payment is an estimate of what these costs in total would be per kilometre travelled. An allowance is fully assessable to the employee. The payment for kilometres you travel to and from your clients' home is also paid at a cents per kilometre rate and is reported by your employer as an allowance. For the reasons noted above it is also assessable income. | Detailed Reasoning - Deductibility of travel to and from work: Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income, except where the outgoings are of a capital, private or domestic nature. An employee may be able to deduct such expenses if they incur the expenses in gaining or producing assessable income and the expense is not of a capital, private or domestic nature. The term 'incurred in gaining or producing assessable income' means incurred 'in the course of gaining or producing assessable income'. For an expense to be incurred in gaining or producing assessable income, it is both sufficient and necessary that the occasion of the expense should be found in whatever is productive of assessable income. Travel to and from work generally enables an employee to commence their income producing activities. It does not form part of performing those activities and so the expense is not incurred in the act of producing assessable income. In your circumstances you were able to negotiate with your client's services provider that you be paid an amount to cover this private expense. Your client lives in a rural location, and you advised no other workers wished to travel the significant distance to the client's home. That this payment is made to you as an allowance by your employer is a matter between you, your employer, and the services provider. The Commissioner is obliged to accept an employer's reporting. It may be the case that you can re-negotiate this payment to be a reimbursement of the actual expenses you incur travelling to and from your client's home. Alternatively, your employer can choose to apply for a private binding ruling to determine the nature of this payment and any other.