Construction allowances and living away from home

Look at your income statement and you will probably see a line for a site allowance, a tool allowance, maybe an allowance for working underground or in the wet. It is easy to read those as money the tax office already knows you spent, and to assume each one is a deduction waiting to be claimed. That assumption costs site workers more than almost anything else on the return, in both directions: some claim allowances that were never deductible, and some pay tax on an allowance while missing the real expense sitting right next to it. This chapter untangles the two, because getting it right is mostly a matter of seeing them as separate things.

An allowance is not a deduction

Start here, because everything else follows from it. Money your employer pays you as an allowance is usually assessable income: it goes on your return and you pay tax on it, the same as your ordinary wages. An allowance only produces a deduction if you actually went out and incurred an expense that would be deductible on its own, and even then the two figures are independent. The allowance does not set the size of your claim, and your claim does not depend on getting an allowance. You could receive a $500 allowance and spend $200, or spend $700 and receive nothing. Treat the income and the expense as two separate lines that happen to sit near each other, and the rest of this page is straightforward.

The allowances that are taxable but earn you nothing back

Some allowances exist to compensate you for the conditions you work in, not for anything you buy. A site allowance, an industry allowance, an inclement-weather allowance, an allowance for working underground: these are assessable income you declare, and there is no matching deduction, because you did not incur an expense in the first place. The extra pay for standing in the rain or working below ground is just that, extra pay, and it is taxed like the rest. Declare it, and claim nothing against it. Money paid for discomfort is income, and there is nothing to claim against it.

The allowances that point to a real expense

Other allowances sit next to a cost you genuinely carry, and those are the ones worth working through, because a deduction may be waiting once you look at what you actually spent.

• Tool allowance. The allowance itself is assessable income, so declare the full amount. Then, separately, you claim your actual tool spend for the year under the $300 rules: immediate for a tool that costs $300 or less, decline in value for one that costs more. The allowance and the claim are two different numbers. Our tools and the $300 rule chapter walks through how to work the deduction out.
• Laundry or first-aid-certificate allowance. Again assessable, again declared. You get a deduction only if you incurred the deductible expense the allowance relates to: the actual cost of laundering your protective clothing, or the cost of a first-aid certificate you needed for your role. No spend, no claim, whatever the allowance says.

Overtime meals

A meal you buy while working overtime can be deductible, but only when a specific set of conditions all hold. The overtime-meal allowance has to be paid under your industrial award or agreement, shown as a separate allowance on your income statement, and declared by you as income. If those are true, you can claim the cost of the meal you bought and ate during that overtime. Up to the ATO's reasonable amount for overtime meals you do not need receipts, though you still have to show how you worked the claim out. Claim above the reasonable amount and you need written evidence for the whole thing, not just the excess. The reasonable amount changes every year, so check the current figure rather than carrying an old one across.

The line that catches people is the everyday one. An ordinary meal on an ordinary shift is never deductible, even if your employer pays you a meal allowance for it. The overtime-meal rule is narrow on purpose, and a general meal allowance does not open it.

Working away, and the living-away trap

This is the crux for FIFO and drive-in drive-out workers, and it is where a lot of money goes wrong. Two situations look similar from the ute and are treated as opposites by the tax office.

The first is genuine work travel. When your job requires you to sleep away from home for a stretch, and you are not reimbursed, the accommodation, meals and incidentals you pay for during that trip can be deductible. A travel allowance paid for those short trips away is assessable income you declare, and you claim the actual costs you incurred, with the reasonable-amounts rules applying the same way they do for overtime meals.

The second is living away from home, and it works nothing like the first. A living-away-from-home allowance is a fringe benefit, not ordinary income. It does not go on your tax return at all, and because it does not, you cannot deduct the accommodation or food it covers. Those are treated as your private living costs, the same as rent and groceries anywhere else. The difference turns roughly on how settled the stay is: a shorter trip leans towards travelling, where a travel allowance and deductions are in play, and a longer, settled stay leans towards living away, where a living-away allowance applies and no deduction follows. The plain version, and the part that surprises a lot of FIFO workers: a "living-away" allowance earns you no meal or accommodation deduction. If your away arrangement is genuinely living away, the money the allowance covers is private, and there is nothing to claim for it.

The records to keep

The paperwork here is simple once you have separated the two sides. Declare every assessable allowance that shows on your income statement, the site and tool and travel ones included, because leaving them off is understating your income. Keep receipts for the expenses you actually claim, the tools, the laundry, the overtime meals above the reasonable amount, the travel costs on genuine overnight trips. And keep a short note of your reasoning for each claim, especially the overtime-meal working and the basis for treating a trip as travel rather than living away. The allowance on the statement is not the proof of the expense; the expense is.

The free option is the ATO's own myDeductions app, which will hold receipts and trips.

The bottom line

Whenever an allowance shows on your income statement, do the two things in order: declare the allowance as income, then ask separately whether you actually incurred a real, deductible expense, and claim only that. The site and underground allowances are income and nothing more. The tool, laundry and first-aid allowances are income, and your claim is your actual spend, not the allowance figure. Overtime meals count only under the award, declared and worked out. And a living-away allowance for FIFO work is not on your return and buys you no deduction at all. Declare the allowance, claim only the real expense, and the confusion that trips up most site workers stops being yours.

General information only, not tax advice. Check the ATO or a registered tax agent for your situation.