ATO Interpretative Decision
ATO ID 2004/77 (Withdrawn)
Goods and Services Tax
GST and payment of a travel allowance to an employee based on a per diem rateFOI status: may be released
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The ATO view for this issue is covered in Employee reimbursements & GST (NAT 7755).This document incorporates revisions made since original publication. View its history and amending notices, if applicable.
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Is the entity, a business operator, making a creditable acquisition that relates to a reimbursement of an employee's expenses in accordance with section 111-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it pays a travel allowance to an employee based on a per diem rate?
Decision
No, the entity is not making a creditable acquisition that relates to a reimbursement in accordance with section 111-5 of the GST Act when it pays a travel allowance to an employee based on a per diem rate as the entity is paying the employee an allowance.
Facts
The entity is a business operator. The entity pays a travel allowance to an employee who incurs expenses in the course of their duties as an employee.
The entity and the employee agree on the amount of travel allowance to be paid and this amount is based on a per diem rate (i.e. based on a standard daily amount).
The entity does not require the employee to repay any amount of the travel allowance that the employee does not spend.
The entity is registered for goods and services tax (GST).
Reasons for Decision
Creditable acquisitions that relate to reimbursements of employee expenses are set out in section 111-5 of the GST Act.
Subsection 111-5(1) of the GST Act provides that, in certain circumstances, where an entity reimburses an employee, an associate of an employee, an agent, partner or company officer for expenses incurred in relation to the performance of their duties, the entity can claim an input tax credit as if the entity itself had incurred the expense.
The entity pays a travel allowance to one of its employees and this amount is based on a per diem rate. The entity does not require the employee to repay any amount of the travel allowance that the employee does not spend.
The payment of the travel allowance is the payment of a set amount that has been agreed upon by both the entity and the employee. The employee is paid the agreed amount, regardless of the actual cost of the expense. As such, the entity's payment of the travel allowance is the payment of an allowance and not the reimbursement of an expense and as such, the circumstances outlined in subsection 111-5(1) of the GST Act do not apply.
Therefore, the entity is not making a creditable acquisition that relates to a reimbursement in accordance with section 111-5 of the GST Act when it pays a travel allowance to an employee based on a per diem rate.
Date of decision: 28 October 2003
Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
section 111-5
subsection 111-5(1)
Other References:
Fact Sheet - Employee reimbursements and GST - NAT 7755
Keywords
Goods and services tax
GST special rules
Reimbursement of employees
GST supplies & acquisitions
Creditable acquisition
ISSN: 1445-2782
| Date: | Version: | |
| 28 October 2003 | Original statement | |
| You are here | 2 December 2005 | Archived |