I'm about to take a new job and my salary package includes car and phone allowances. I can't, however, see myself spending as much as my allowances. I understand any allowances not spent become taxable income at the end of the financial year. If so, is there any real benefit of having a phone and car allowance? Should I ask for the base salary to include the allowances instead? Either way, I would still claim my business vehicle use and phone expenses as a deduction or am I missing something?

Hi Maurice

Both the car and phone allowances you would receive would be treated as your assessable income. You would be however be able to claim the actual work related usage of your car and phone as a work related deduction.

You are right, in your case whether the allowances are separated or added to your base salary would not change your tax situation. Employers on the other hand like to separate your base salary from the allowances so in the future if you are not using your car or phone as much, they can bring the allowance down or if you are using it a more, they can increase it without playing around with your base salary.

Regards

Suresh Rajani