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. 

Reimbursement

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.  For example, an employee attends a course, pays for flights, accommodation and taxi fares to attend and submits a reimbursement claim together with the relevant invoices for the expenses. The employer pays the reimbursement and claims the GST as listed on the invoice.

Allowance

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.

Substantiation

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

Please also note that many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances. Should you have any further questions, please email us at RGA Business and Tax Accountants at reception@rgaaccounting.com.au . All rights reserved. Brought to you by RGA Business and Tax Accountants. Liability Limited by a scheme approved under Professional Standards Legislation.