Open Allowances
From the left sidebar, select Finance.
At the top of the Finance page, select Allowances.
This opens the Allowances page.
Review the Allowances page
The Allowances page includes:
A Search allowances field
A Create Allowance button
A table of existing allowances
The table shows:
Name
Type
Requestable
Row action menu
Examples of allowances may include Sleepover, Broken Shift, Kilometers, and First Aid.
Search for an allowance
Use the Search allowances field to find an allowance by name.
This is helpful when your organization has multiple allowances configured.
Create a new allowance
Select Create Allowance.
A modal will open where you can configure the allowance name, type, requestable setting, and finance assignment if available.
Complete the allowance details
In the Create Allowance modal, complete the required details.
Add:
Name
Enter a clear allowance name, such as Sleepover Allowance.Type
Select the allowance type.Requestable
Turn this on if staff should be able to request the allowance.
Allowance type options may include:
Active Jobs
Transport
Travel
Laundry
Meals
Tools
Tasks
Qualifications
Other
Save the allowance
After completing the allowance details, select Save.
The allowance will appear in the Allowances table.
Review requestable status
Check the Requestable column to see whether staff can request the allowance.
A value of Yes means staff can request it.
A value of No means staff cannot request it directly.
Edit an allowance
Select the three-dot menu on the right side of the allowance row.
Select Edit.
Update the allowance details, then save your changes.
Open Payroll settings in Xero
In Xero, open the Payroll menu from the top navigation.
Select Payroll settings from the dropdown.
This opens the payroll settings area where organisation, pay frequency, holidays, pay items, and superannuation settings are managed.
Open Pay Items and add an allowance
From Payroll settings, select the Pay Items tab.
In the left menu, select Earnings.
Select Add, then choose Allowance.
This opens the Allowance panel where the Xero payroll pay item can be created.
Complete the Xero allowance details
In the Allowance panel, enter the main details for the pay item.
Earnings Name: Enter the allowance name. Where possible, use the same or similar name as the allowance in Finance.
Type: Select the allowance category.
Display Name: Optional. Use this if the wording on employee payslips should be different from the earnings name.
Choose the allowance type in Xero
Open the Type dropdown and choose the option that best matches the allowance purpose.
Available Xero allowance type options may include:
Car: Mileage allowance for kilometres travelled for business purposes
Transport: Award transport payment
Travel: Domestic and overseas travel and accommodation
Laundry: Washing, drying, and ironing of required uniforms
Meals: Overtime meal allowances
Tools: Compensation for providing personal work equipment
Tasks: Additional activities above the base rate of pay
Qualifications: Compensation for attaining a certified skill
Other: Allowance types not listed above
Select the rate type
Open the Rate Type dropdown and select how the allowance should be calculated.
Rate Type options include:
Fixed Amount: Enter the amount to pay each time the allowance is applied.
Multiple of employee's ordinary earnings rate: Enter the multiplier, such as 2.0.
Rate per Unit: Enter the type of units, such as hours, and the rate per unit.
The fields shown in Xero change based on the rate type selected.
Select the expense account
In Expense Account, choose the account used to record the allowance cost.
Use the account recommended by your payroll or accounting team. Common options may include Wages and Salaries, but the correct account depends on your organisation setup.
Review payroll reporting settings
Review the reporting checkboxes before saving the allowance in Xero.
Settings may include:
Exempt from PAYG withholding
Include in superannuation calculation
Report as qualifying earnings
Reportable as W1 on Activity Statement
These settings affect payroll, superannuation, and reporting. Confirm the correct setup with your payroll or accounting team before changing them.
If Xero shows a Qualifying earnings for Payday Super notice, review the guidance before saving or updating pay items.
Save the allowance in Xero
Once all details are complete, select Add.
A green confirmation message will appear when the earnings rate has been added successfully.
The allowance should now appear in Xero Pay Items and can be used for payroll or syncing where supported by the integration.
Important Notes
Allowances can be used for shift and pay run calculations.
The Requestable setting controls whether staff can request the allowance. It does not automatically change the Xero payroll settings.
Keep allowance names consistent between Finance and Xero so they are easier to map, review, and troubleshoot.
Allowance types help organise allowances into categories such as transport, travel, laundry, meals, tools, tasks, qualifications, or other expenses.
Xero rate types control how the allowance amount is calculated. Choose the rate type that matches how your organisation pays the allowance.
Xero tax, superannuation, activity statement, and qualifying earnings settings can affect payroll reporting. Confirm these settings before saving.
If Xero or another finance integration is not connected, some finance assignment or syncing options may not be available.
Use clear allowance names so admins and staff can understand what each allowance is for.
Troubleshooting
If you cannot create an allowance in Finance, check that all required fields have been completed.
If the allowance type you need is not available in Finance, check your organisation's finance configuration.
If staff cannot request an allowance, confirm that Requestable is enabled.
If Payroll settings is not visible in Xero, check that you have the correct Xero payroll permissions.
If Allowance does not appear under Add in Xero Pay Items, check that payroll is enabled for the Xero organisation.
If the Expense Account you need is missing in Xero, check the Xero chart of accounts or ask your accountant to confirm the correct account.
If the amount, multiple, or unit fields do not look right, check the selected Rate Type.
If finance syncing is not available, connect the finance integration through Admin > Integrations.
If an allowance does not appear after saving, refresh the page and check the search field.
If an allowance does not sync from Xero, refresh the integration connection and check that the Xero pay item was saved successfully.
If you cannot access Allowances, check your permissions for Finance.