Claiming GST credits for employee expense reimbursements

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.

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

Remember, as with all GST input tax credit claims, you will be expected to hold sufficient evidence to substantiate your claim. Generally, this will be a tax invoice for the purchase that is being reimbursed.

If you’ve made a mistake or have incorrectly claimed GST input tax credits on items that weren’t reimbursements, you should make a voluntary disclosure.

Depending on your business, this can be a fairly complex process and many businesses prefer to leave it up to their accountant to manage, this ensures that they don’t miss receiving any GST deductions and avoid ever missing their BAS statement lodgement and receiving a fine. Contact Omnis Group’s Business Accountants in West Perth on 08 9380 3555.