Tax developments at this time of year can be a bit slow so once you have got the pain of paying tax on 15 January out of the way it is time to reflect on what occurred prior to Christmas when most people were too busy to take it all in.
On 20 December IRD released a new determination covering the situation where an employee uses their own phone in the employer's business and is reimbursed for this.
Payments to an employee are taxable and subject to PAYE therefore unless the reimbursement is for actual business related expenditure, or a reasonable estimate of expenditure, it will be subject to tax. This will apply when a reimbursement is made for an employee telephone.
IRD split telephone reimbursements into three categories.
- Where the phone is principally used for business they will allow 75% (of the actual bill or a reasonable estimate of the costs) to be tax free to the employee; or
- Where the phone is principally private the employer can treat 25% (of the actual bill or a reasonable estimate of the costs) as tax free; or
- IRD also provide a De Minimis threshold allowing employers to reimburse $5 per week per employee up to $265 per year and treat this as tax free
The determination does not apply where the employer also provides a telephone to the employee. Where the employer provides the telephone any private use might be subject to FBT.
It might be a good time to check what your organisation is doing and if your reimbursements are in line with the IRDs guidance.