Under the new Single Touch Payroll (STP) allowances paid to your employees need to be classified into specific types on the income statement, similar to how they used to be on the payment summaries. However there's a difference now in STP where seperately itemised allowances are grouped and reported by category.
There are many different kinds of allowances paid to employees in Australia, and the way they are grouped for STP is very similar to the ATO's guide on taxing allowances.
Whether you're using MYOB or Xero, you will need to classify and change the settings for your allowances to be classified. You'll notice that they all have the same allowance categories as displayed below;
STP Allowance Classifications
But how do you know which of your many allowances are meant to go into which of the above categories? Read our explanations of each allowance below...
Any allowance listed in TABLE 1 need to be classified as "Allowance (Other)"
Any allowance listed in TABLE 2 need to be classified as "Allowance (Car)"
NOTE: These allowances are calculated on a per KM basis
Any allowance listed in TABLE 4 need to be classified as "Allowance (Laundry)"
Any allowance listed in TABLE 5 need to be classified as "Allowance (Meals)"
Any allowance listed in TABLE 3 need to be classified as "Allowance (Transport)"
Any allowance listed in TABLE 6 need to be classified as "Allowance (Travel)"
These allowances include domestic and overseas travel allwoance above the reasonable limit, and ALL overseas accomodation allowances.
Congratulations! Now you're ready to start filing your payroll information to the ATO via STP.
For more information about how STP read our comprehensive STP guide. It covers everything including how it will affect your business, how to set it up in Xero or MYOB, and how to fix filing errors.
If you're unsure on how your allowances should be classified, ask your bookkeeper or if you don't have one, contact our friendly team for some advice.