What is the difference between allowance and reimbursement

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May 16, What is the difference between an allowance and a reimbursement? Allowances Allowances are separate and identifiable payments made to an employee for: Enduring specific working conditions, i. Reimbursements Reimbursements are payments made to a worker for actual expenses that they have already incurred, and the employer may be subject to fringe benefits tax FBT.

This model enables expense management to be simplified , both for the employee and the supervisor, as there is no need for a detailed expense report.

It is simply a matter of verifying if the allowance is in accordance with the trips taken. As such, both parties save time and paperwork. However, unfortunately, in many cases, this model has been abused and, on some occasions, it has been exploited as a way to get an extra income on top of the salary.

Some employees claim allowances that they are not entitled to or above the amount of expenses that the trip requires. Nowadays, there is a trend towards eliminating allowances and replacing them with expense reimbursement. For the employee, this means having to submit a detailed expense and mileage claim spreadsheet with the corresponding receipts.

Meanwhile, for the supervisor, this involves checking these reports thoroughly to ensure that they are correct. Show print controls. Allowances and reimbursements As a payer you will have to know the correct withholding for allowances and the differences between as well as different types of allowances and reimbursements.

On this page: Allowances Reimbursements Super obligations when paying allowances Allowances Allowances are separately identified payments made to an employee for: working conditions - for example, danger, height or dirt qualifications or special duties - for example, first aid certificate or safety officer expenses that can't be claimed as a tax deduction by the employee — for example, normal travel between home and work work related expenses that may be claimed as a tax deduction by the employee - for example, travel between work sites.

Reimbursements Reimbursements are payments made to a worker for actual expenses already incurred, and the employer may be subject to fringe benefits tax FBT.

Super obligations when paying allowances You must pay super on an employee's ordinary time earnings.