Taxation Administration (Withholding Variation for Payment of Certain Allowances) Legislative Instrument 2025

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Legislation au F2025L01094 In force Legislative Instrument

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Taxation Administration (Withholding Variation for Payment of Certain Allowances) Legislative Instrument 2025

made under Section 15-15 in Schedule 1 of the

Taxation Administration Act 1953

Compilation No. 1

Compilation date: 01 July 2026

Includes amendments: F2026L00863

About this compilation

This compilation

This is a compilation of the Taxation Administration (Withholding Variation for Payment of Certain Allowances) Legislative Instrument 2025 that shows the text of the law as amended and in force on 01/07/2026 (the compilation date).

The notes at the end of this compilation (the endnotes) include information about amending laws and the amendment history of provisions of the compiled law.

Uncommenced amendments

The effect of uncommenced amendments is not shown in the text of the compiled law. The details of amendments made up to, but not commenced at, the compilation date are underlined in the endnotes. Any uncommenced amendments affecting the law are accessible on the Register (www.legislation.gov.au).

Application, saving and transitional provisions

If the operation of a provision or amendment of the compiled law is affected by an application, saving or transitional provision that is not included in this compilation, details are included in the endnotes.

Modifications

If the compiled law is modified by another law, the compiled law operates as modified but the modification does not amend the text of the law. Accordingly, this compilation does not show the text of the compiled law as modified. Any modifications affecting the law are accessible on the Register.

Self‑repealing provisions

If a provision of the compiled law has been repealed in accordance with a provision of the law, details are included in the endnotes.

Contents

1  Name

3  Authority

4  Definitions

6  Withholding amount varied to nil

7  Specified allowances

Endnotes

Endnote 1—About the endnotes

Endnote 2—Abbreviation key

Endnote 3—Legislation history

Endnote 4—Amendment history

 

1  Name

  This instrument is the Taxation Administration (Withholding Variation for Payment of Certain Allowances) Legislative Instrument 2025.

3  Authority

  This instrument is made under section 15-15 in Schedule 1 to the Act.

4  Definitions

Note: A number of expressions used in this instrument have the same meaning as in Schedule 1 to the Act. Expressions in Schedule 1 to the Act have the same meaning as in the ITAA 1997 (see section 3AA of the Act). The following expressions are relevantly defined in section 995-1 of the ITAA 1997:

(a) business kilometres;

(b) car expense;

(c) income tax law;

(d) meal allowance expense;

(e) travel allowance expense;

(f) work expense.

  In this instrument:

Act means the Taxation Administration Act 1953.

ITAA 1997 means the Income Tax Assessment Act 1997.

laundry expense means a work expense to do with washing, drying or ironing clothes (but not dry cleaning).

specified allowance means an allowance that is specified at section 7.

6  Withholding amount varied to nil

 (1) The amount that a payer must withhold from a withholding payment to a payee under sections 12-35, 12-40 and 12-45 of Schedule 1 to the Act is varied to nil where:

 (a) the payment relates to a specified allowance; and

 (b) the payer reasonably expects that the payee will incur deductible work expenses related to the specified allowance that in total are at least equal to the amount of the specified allowance; and

 (c) the amount and nature of the payment is shown separately in the accounting records of the payer.

Note: Normal withholding rates apply to the part of a payment related to a specified allowance that exceeds a limit specified in section 7 for that allowance. The normal withholding rates that apply for the financial year relevant to the payment are provided in a legislative instrument made under section 15-25 in Schedule 1 to the Act for that financial year.

7  Specified allowances

  The following allowances are specified for the purposes of section 6:

 (a) an allowance for car expenses based on a set rate per kilometre travelled by a car, where:

 (i) the allowance is calculated by multiplying the set rate per kilometre by the total number of business kilometres travelled by the car; and

 (ii) the set rate used in the calculation does not exceed the rate determined for the income year under subsection 28-25(4) of the ITAA 1997; and

 (iii) the total number of business kilometres used in the calculation in respect of which the allowance is paid during the financial year does not exceed the number of business kilometres provided for in subsection 28-25(2) of the ITAA 1997;

 (b) an allowance for laundry expenses where the total amount paid during the financial year for such an allowance does not exceed $150;

 (c) an allowance for domestic travel allowance expenses which does not exceed the amount that the Commissioner considers reasonable for the income year for the purposes of section 900‑50 of the ITAA 1997;

 (d) an allowance for overseas travel allowance expenses which does not exceed the amount that the Commissioner considers reasonable for the income year for the purposes of section 900-55 of the ITAA 1997;

 (e) an allowance for overtime meal allowance expenses covered by section 900-60 of the ITAA 1997 which does not exceed the amount that Commissioner considers reasonable for the income year for the purposes of section 900-60 of the ITAA 1997; and

 (f) an award transport payment.


Endnotes

Endnote 1—About the endnotes

The endnotes provide information about this compilation and the compiled law.

The following endnotes are included in every compilation:

Endnote 1—About the endnotes

Endnote 2—Abbreviation key

Endnote 3—Legislation history

Endnote 4—Amendment history

Abbreviation key—Endnote 2

The abbreviation key sets out abbreviations that may be used in the endnotes.

Legislation history and amendment history—Endnotes 3 and 4

Amending laws are annotated in the legislation history and amendment history.

The legislation history in endnote 3 provides information about each law that has amended (or will amend) the compiled law. The information includes commencement details for amending laws and details of any application, saving or transitional provisions that are not included in this compilation.

The amendment history in endnote 4 provides information about amendments at the provision (generally section or equivalent) level. It also includes information about any provision of the compiled law that has been repealed in accordance with a provision of the law.

Misdescribed amendments

A misdescribed amendment is an amendment that does not accurately describe how an amendment is to be made. If, despite the misdescription, thfe amendment can be given effect as intended, then the misdescribed amendment can be incorporated through an editorial change made under section 15V of the Legislation Act 2003.

If a misdescribed amendment cannot be given effect as intended, the amendment is not incorporated and “(md not incorp)” is added to the amendment history.

Endnote 2—Abbreviation key

 

ad = added or inserted

orig = original

am = amended

p = page(s)

amdt = amendment

para = paragraph(s)/subparagraph(s)

C[x] = Compilation No. x

/sub‑subparagraph(s)

ch = Chapter(s)

pres = present

cl = clause(s)

prev = previous

cont. = continued

(prev…) = previously

def = definition(s)

pt = Part(s)

Dict = Dictionary

r = regulation(s)/Court rule(s)

disallowed = disallowed by Parliament

reloc = relocated

div = Division(s)

renum = renumbered

exp = expires/expired or ceases/ceased to have

rep = repealed

effect

rs = repealed and substituted

gaz = gazette

s = section(s)/subsection(s)

LA = Legislation Act 2003

/rule(s)/subrule(s)/order(s)/suborder(s)

LIA = Legislative Instruments Act 2003

sch = Schedule(s)

(md not incorp) = misdescribed amendment

SLI = Select Legislative Instrument

cannot be given effect

SR = Statutory Rules

mod = modified/modification

sub ch = Sub‑Chapter(s)

No. = Number(s)

sub div = Subdivision(s)

Ord = Ordinance

sub pt = Subpart(s)

 

underlining = whole or part not

 

commenced or to be commenced

 

Endnote 3—Legislation history

 

Name

Registration

Commencement

Application, saving and transitional provisions

Taxation Administration (Withholding Variation for Payment of Certain Allowances) Legislative Instrument 2025

16 September 2025

(F2025L01094)

17 September 2025

—

Taxation Administration (Withholding Variation for Payment of Certain Allowances) Amendment Legislative Instrument 2026

30 June 2026

(F2026L00863)

s 1- 4: 1 July 2026 (s 2(1) item 1)

sch 1 (items 1 – 5): 1 July 2026 (s 2(1) item 2 (first occurring))

sch 1 (items 6 – 7): 1 October 2026 (s 2(1) item 2 (second occurring))

—

 

Endnote 4—Amendment history

 

Provision affected

How affected

Section 2

Section 4 (note)

Section 4

Section 5

Paragraph 6(1)(a)

Subparagraph 7(a)(i)

Paragraph 7(b)

Paragraph 7(e)

Paragraph 7(f)

Schedule 1

rep LA s 48D

rs F2026L00863

ad F2026L00863

rep LA s 48C

ad F2026L00863

ad F2026L00863

am F2026L00863

am F2026L00863

rep F2026L00863

rep s 48C LA

 

 

 

 

 

Overview

The Taxation Administration (Withholding Variation for Payment of Certain Allowances) Legislative Instrument 2025 was enacted to address the problem of over-withholding of tax on certain allowances paid to employees. This legislative instrument was made under section 15-15 in Schedule 1 of the Taxation Administration Act 1953 and is administered by the Australian Parliament. The policy objective of this legislative instrument is to provide relief to employees who incur deductible work expenses related to specified allowances, thereby ensuring that the withholding tax does not exceed the actual tax liability of the employee. Under this legislative instrument, the withholding amount can be varied to nil for specified allowances such as car expenses, laundry expenses, domestic and overseas travel allowances, and overtime meal allowances, provided certain conditions are met. This legislative instrument aims to streamline the tax withholding process for specific types of allowances, reducing administrative burdens on both employers and employees while ensuring that the tax system remains fair and efficient. By allowing the withholding amount to be adjusted to nil for specified allowances where deductible work expenses are incurred, it seeks to prevent the over-withholding of tax that may otherwise occur, thereby providing financial relief to employees. This approach aligns with the broader policy goal of simplifying tax administration and improving compliance.

Scope and Application

The Taxation Administration (Withholding Variation for Payment of Certain Allowances) Legislative Instrument 2025 applies to payers and payees involved in the payment of specified allowances within Australia. These allowances include car expenses, laundry expenses, domestic and overseas travel allowance expenses, overtime meal allowance expenses, and award transport payments, subject to certain conditions and limits. The Act is administered under the Taxation Administration Act 1953 and incorporates definitions from the Income Tax Assessment Act 1997, ensuring consistency in interpretation and application. The withholding amount is varied to nil if the payer reasonably expects the payee to incur deductible work expenses at least equal to the allowance amount, and the payment details are distinctly recorded in the payer’s accounting records. The Act has a national reach across Australia and its provisions can be extended or restricted through subordinate instruments. There are no explicit exclusions or exemptions mentioned, but normal withholding rates apply to any portion of the payment exceeding the specified limits for each allowance type.

Key Provisions

The Taxation Administration (Withholding Variation for Payment of Certain Allowances) Legislative Instrument 2025 sets out specific provisions concerning the withholding of certain allowances. Under section 6, the withholding amount is varied to nil for specified allowances, provided certain conditions are met. For instance, the payment must relate to a specified allowance, the payer must reasonably expect the payee to incur deductible work expenses equal to or exceeding the amount of the allowance, and the amount and nature of the payment must be separately recorded in the payer's accounting records. These conditions must be met for the withholding amount to be varied to nil. The Act imposes several obligations on the parties involved. Payers must ensure that the specified allowances are accurately recorded and that the conditions for withholding variation are met before making any payments. Payees must ensure that their work-related expenses are documented and can be substantiated if required. Both parties must keep detailed accounting records as mandated by the Act. The specified allowances themselves are defined under section 7, which includes allowances for car expenses, laundry expenses, domestic and overseas travel allowance expenses, overtime meal allowance expenses, and award transport payments, each with its own criteria. Breach of the provisions set out in this Legislative Instrument can lead to various consequences. For example, if a payer fails to correctly apply the withholding variation provisions, they may be subject to penalties. Similarly, if a payee falsely claims expenses or does not meet the deductible work expense requirements, they could face penalties or other legal repercussions. While the Legislative Instrument does not specify exact penalties, such breaches could lead to fines or other civil or criminal consequences under the relevant taxation laws. It is important for both payers and payees to comply with the Act to avoid any potential penalties or legal issues.

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Sourced from the Federal Register of Legislation at 26 August 2026. For the latest information on Australian Government law please go to https://www.legislation.gov.au.