If you provide employees with mobile phones, laptops, or devices for work, which are used solely for work, you can claim the devices and usage plans as business expenses.
Where employees use their own phones or devices for both work and private use, you may choose to reimburse them or provide reimbursing allowances for the business use portion of the devices and usage plans. The amount of a reimbursing allowance should be based on a reasonable estimate of the work expense.
A reimbursement to an employee for out-of-pocket work-related expenses is tax exempt for the employee and you can claim it as a tax deduction as it’s a business expense.
Inland Revenue has set out guidelines for reimbursements for telecommunications tools, determining the extent they are taxable to the employee:
- Where an employee uses a device principally for work, you can reimburse or pay an allowance to the employee, treating 75% of the total billed amount as exempt income of the employee, with 25% taxable to the employee. If you pay the employee 75% of the total bill as a reimbursement or reimbursing allowance for usage plans, then the whole amount you pay is exempt.
- If the employee uses a device for work sometimes, but principally for private use, if you reimburse the whole amount billed, you can treat 25% as exempt income of the employee. 75% is taxable to the employee. If you pay the employee 25% of the total bill as reimbursement or allowance, the whole amount you pay is exempt.
- If the employee uses a device mainly for their own use but with some minimal work use, you can treat payments of up to $5 per week, per employee, as exempt income of the employee. These payments cannot be more than $265 per year, per employee.
Your reimbursements to employees may also allow for depreciation loss, calculated using the Commissioner’s rates for the items. Please contact us if you would like help calculating allowances and depreciation.