From 1 October 2026, employers must withhold tax from award transport payments — travel and fares allowances under long-standing industrial instruments that, until now, have been paid with no tax withheld. On a $22-a-week fares allowance, a worker earning $1,300 a week will have about $7 more tax taken out each week.
Award transport payments from 1 October 2026
| What changed | Before | Now |
|---|---|---|
| PAYG withholding on the payment | Varied to nil | Withheld like other pay |
| Single Touch Payroll | Reported as award transport payment (type AD) | Reported under the allowance's normal category |
| Applies to amounts paid | — | On or after 1 October 2026 |
| Cents per km car allowance at the ATO rate | — | Unchanged — 91c/km up to 5,000 km in 2026-27 |
What changed and why
Award transport payments had their own rules in tax law, so the ATO varied withholding on them to nil and required employers to report them separately in Single Touch Payroll. The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 received royal assent on 26 June 2026 and repeals those provisions. The ATO's guidance, published on 26 August 2026, says that for amounts previously treated as award transport payments and paid on or after 1 October 2026, employers must withhold from them and no longer identify them separately in STP. The payments still have to be reported, under whichever allowance category fits.
Employers can switch their STP reporting with either a cutover method (new amounts go to the new category from the first payday on or after 1 October) or a zeroing-out method (an update event moves the year-to-date amount across, available until 31 December 2026). Either way, reporting of award transport payments as type AD has to stop during 2026-27.
What it means for your pay
The allowance is added to the pay your employer withholds from, so your net pay drops slightly. Using the FY2026-27 weekly tax table (tax-free threshold claimed), a $22 weekly allowance on top of:
| Weekly wage | Tax withheld before | From 1 October | Extra withheld a week |
|---|---|---|---|
| $500 | $21 | $24 | $3 |
| $1,300 | $235 | $242 | $7 |
| $3,500 | $1,002 | $1,011 | $9 |
Withholding is a prepayment, not the final bill: what you actually owe on the allowance is worked out in your tax return. What changes is that the tax is collected through the year instead of at tax time.
This does not change cents-per-kilometre car allowances paid at or below the ATO rate for deductible work travel, which remain free of withholding for the first 5,000 km. Our cents per km guide covers those, the travel allowance guide covers overnight travel, and you can check your new net pay with the tax withheld calculator or read the allowance lines on your payslip with our payslip guide.