Claiming GST Credits For Employee Expense Reimbursements

Hello Chasers,

Quite often as a business owner we might need to ‘reimburse’ our Team Members for expenses they have incurred in helping us run our businesses.

The type of reimbursement, how it is paid and the documentation kept to prove it as a business expense are critical to being able to claim it as a tax deduction but also the implications of the tax liability of our employees too.

Employers may be entitled to claim GST input tax credits for payments they have made to reimburse. employees for expenses that are directly related to their business activities.

A ‘reimbursement’ is provided when a taxpayer pays their employee the amount, or part of the amount, of a particular work-related purchase they make.

Employers are not entitled to a GST input tax credit if they pay their employee an allowance, or make a payment based on a notional expense, such as a cents-per-kilometre payment, travel or meal allowance.

An ‘allowance‘ is provided when a taxpayer pays their employee an amount for an estimated expense without requiring them to repay any excess.

Employee taxpayers are expected to hold sufficient evidence to substantiate their claim, such as a tax invoice for the purchase that is being reimbursed.

Getting tax advice on how best to ‘reimburse’ your Team Members is critical right from the outset. Contact our Team on 55612643 if you do this and want to get it right and so they don’t pay tax unnecessarily.

Have a great day!

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