How do I reimburse expenses?

If you need to reimburse expenses to an employee as part of their pay, you will need to add an extra earnings payment to their payslip.

If the expense reimbursement is to be paid regularly to the employee in every pay run, you should set it up as a recurring extra payment in Payroll settings. This would be unlikely as this is a reimbursement not an allowance. For more information on the difference between reimbursements and allowances see this guidance from the Australian Taxation Office (ATO).
 

If the expense reimbursement is a one-off payment, you can add it while completing the relevant pay run.

In this example, the employee has provided us with a receipt for their petrol purchased for work travel and so we are adding a one-off $75 reimbursement to the employee's pay as an extra payment.

Note:

• The title entered "Petrol expense" will appear on the employee's payslip.
• Class is selected as a Reimbursement (will not be included in tax calculations)
• STP category is selected as Skip STP Reporting (will not be included in STP reporting)
   

Important Note: Deputy does not provide advice on employment law or taxation matters, including payroll specifics. Please seek professional advice from your legal/tax adviser if you are unsure what to select in these fields. 

It is your responsibility to ensure that you are correctly classifying and reporting payment types through Single Touch Payroll. It is also your responsibility as an employer to ensure that you are paying your employees correctly in line with applicable award/s and industrial instrument/s and so it is important that you carefully review (and if necessary, make any adjustments to) the payslips generated for each of your team members before "completing" the pay run.

Additionally you may want to visit the ATO website for assistance with selecting the correct class and STP category.

Understand how Reimbursements are taxed and reported

When configuring a Reimbursement payment, here's what each of these element represents:

The Class you select will determine if tax etc. is calculated on the payment.

The STP category you select will determine if and how this will be reported in the Single Touch Payroll report. 

Note: If you select Skip STP Reporting, this payment will not be included in the STP report. 

The Tax Method is set to default to PAYG, which means the payment is being considered under the PAYG taxing system. This field also allows you to apply marginal tax calculation to a taxable payment. 

The Class selected earlier will determine if tax is to be applied to the payment. 

 

These selections will show up in the pay run and the tax treatment of the payment should reflect this. See the example below.

 

Gross Taxable is a payslip total / display field only. It does not reflect how the item is actually taxed or reported in the STP report. In the example below, you'll see from the tax calculated that the $75 reimbursement has not been included in the taxable amount, by the amount of tax deducted.