If you are an employer registered for Goods and Services Tax
(GST), you may be entitled to claim GST credits for payments you
make to reimburse employees (including company directors) or
partners in a partnership for certain work-related expenses.
If you are running a business, you will be entitled to a GST
credit for an employee-reimbursed expense if the following criteria
the employee's (or associate's) expense is directly
related to their activities as your employee or the reimbursement
is an "expense payment benefit"
the sale of the item bought by your employee was taxable (that
is, not "input taxed"), and
your employee is not directly entitled to a GST credit for the
The Tax Office says a business can claim GST credits where it
has relevant documents such as receipts or tax invoices issued to
the employee. These will need to be provided to substantiate claims
A business that is entitled to a GST credit can claim it in a
Business Activity Statement once it has been provided with this
An "expense payment benefit" is made, according to the
Tax Office, when a business makes a payment to, or reimburses,
another person "in whole or in part, of an amount of money
spent by your employee as part of their employment with you".
Fringe benefits tax (FBT) may apply however (see below).
A business is not entitled to a GST credit if
reimbursed "non-deductible expenses", such as the
portion of expenses relating to entertaining clients (usually only
half of such expenses are deductible for the provision of
reimbursed expenses that relate to input taxed sales that are
made in the running of the business and it exceeds the special
threshold for financial purchases (a reduced GST credit is
therefore available on specific purchases), or
paid the employee an "allowance" (see below).
The Tax Office says that if a business makes a payment to an
employee based on a "notional" rather than an actual
expense, it is not making a reimbursement.
For example, if a business makes a cents-per-kilometre payment
to cover work-related use of an employee's private car, it is
paying an allowance and not making a reimbursement (again, consider
the FBT implications).
A business makes a reimbursement where it pays an employee for
the price, or part of the price, of a particular purchase they
For example, if an employee incurs an expense of $220 for a
purchase, and is re-paid the whole $220 or even half of that,
either payment will be a reimbursement.
A business will also have made a reimbursement if:
it pays the employee for a particular expense they haven't
paid, provided they have become liable for the expense
it pays the employee an advance for an expense they have not
yet incurred, providing they have to repay any unspent amount of
the advance to the business, or
it pays an expense on behalf of the employee, for example, to
the business who has made a sale to the employee (the GST
legislation treats this type of payment as a reimbursement).
Where any personal use of a purchased item is involved, or the
expense relates to non-cash employee benefits, liability for FBT
should be a consideration.
Ask your Moore Stephens Director for more guidance on FBT, and
if GST credits for staff reimbursements is an option for your
Exemptions or concessions on stamp duty could apply when contemplating the purchase or transfer of NSW real estate.
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