Summarise with AI
What allowances are
Allowances are extra payments made on top of an employee's base pay to compensate for specific costs, tasks or working conditions. Rather than being part of the ordinary hourly rate, they are separate amounts set by the applicable Modern Award or enterprise agreement, which spells out which allowances apply, how much they are, and when they must be paid.
Common types of allowances
Expense-related
- Meal allowance
- Travel / vehicle allowance
- Tool allowance
- Uniform and laundry allowance
Skill or condition-related
- First-aid allowance
- Higher-duties allowance
- Leading-hand / supervisor allowance
- Broken shift allowance
The precise allowances available depend entirely on the award. A broken shift, for example, often triggers a broken shift allowance, while trade roles commonly attract a tool allowance.
How allowances work
Allowances are calculated in different ways depending on their purpose:
- Per shift or per day: such as a meal allowance for a qualifying overtime period
- Per week: such as a tool or first-aid allowance paid as a flat weekly amount
- Per kilometre or unit: such as a vehicle allowance based on distance travelled
- As a percentage: some allowances are a percentage of a standard rate
Because allowances vary so much between awards, an award interpretation engine that applies the right allowance to the right shift removes a lot of manual guesswork.
Allowances must be paid correctly
Tax and super treatment
Allowances are treated differently for tax and superannuation depending on their nature. Some are taxable income, while genuine reimbursements of actual expenses may be treated differently, and certain allowances form part of ordinary time earnings for the superannuation guarantee. Confirm the treatment of each allowance with current ATO guidance.
Allowances change with the award
Fair Work reviews award allowance amounts periodically, often alongside the annual wage review. Using an out-of-date figure leads to underpayment, so keep allowance values current with the applicable Modern Award.
Common mistakes with allowances
Missing applicable allowances
Overlooking allowances the award requires — like first-aid or tool allowances — is a frequent underpayment cause.
Using outdated amounts
Allowance figures change with award updates; stale amounts cause under- or over-payment.
Not itemising on payslips
Allowances should be shown separately on the payslip, not rolled silently into gross pay.
Key takeaways
Allowances are extra payments on top of base pay that cover specific costs, tasks or conditions — meals, tools, travel, laundry, first aid and more. They are set by the applicable Modern Award, calculated in various ways, and must be paid at the correct amount and itemised on payslips.
Tracking which allowances apply to which shifts across a whole team is exactly the kind of detail that gets missed by hand. RosterElf applies award allowances automatically, so employees are paid correctly and paid the allowances they are owed.
Keeping track of meal, tool and travel allowances across your team? RosterElf applies award allowances automatically so nothing is missed at pay time.
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