Claiming GST Credits for Employee Expense Reimbursements

Claiming GST Credits for Employee Expense Reimbursements

Navigating the realm of GST input tax credits for employee reimbursements is crucial for employers aiming to optimise their financial strategies. The Australian Taxation Office (ATO) has provided essential insights that every business should know when considering their GST credit claims on employee reimbursements.

At Simmons Livingstone, we believe that informed clients make better financial decisions. That’s why we want to ensure our clients are well-versed in the nuances of GST input tax credits and employee reimbursements.

The ATO’s guidance underscores that taxpayers may have the opportunity to claim GST input tax credits for payments made towards reimbursing employees for taxable expenses directly associated with their business activities. A ‘reimbursement’ comes into play when a taxpayer compensates an employee with either the complete amount or a portion of a specific work-related purchase they have made. This mechanism serves as a valuable channel through which businesses can recover GST input tax credits.

It’s essential, however, to draw a clear distinction between reimbursements and allowances. Businesses cannot claim GST input tax credits if they provide allowances or payments based on notional expenses. This includes scenarios such as cents-per-kilometre payments, travel and meal allowances. An ‘allowance’ in this context pertains to disbursing an estimated expense amount to an employee without reimbursing any excess.

To ensure accurate and compliant GST credit claims, it’s crucial to keep in mind the following scenarios where such claims might not be applicable:

  • Reimbursement of non-deductible expenses, like entertainment expenses.
  • Reimbursement of expenses tied to input-taxed supplies that the business makes.
  • Instances where the employee is already entitled to the GST input tax credit.

Our commitment to our clients extends beyond awareness to action. Just as the ATO advises, taxpayers must maintain sufficient evidence to substantiate their claims. In most cases, this evidence will manifest as a valid tax invoice for the purchase being reimbursed. This enhances compliance and strengthens the credibility of your GST credit claims.

Recognising that errors can occur, the ATO encourages taxpayers who might have mistakenly claimed GST input tax credits on non-reimbursable items to take the initiative. Making a voluntary disclosure is a responsible step towards rectifying any inadvertent claims.

 

At Simmons Livingstone, we pride ourselves on providing expert guidance that empowers our clients to make financially sound decisions. Contact our team today to discover how we can collaborate to optimise your business’s financial landscape.

Call us on 1800 618 800 or via email at admin@simmonslivingstone.com.au.



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