You can reimburse employees for actual expenses they've paid while doing their job. These expenses are not taxable. However, if the payment is more than the employment-related expenses, the excess amount is taxable.
Reimbursing expenses include:
- meals
- clothing
- mileage
- vehicles
- tools.
To calculate the reimbursement allowance, you need the employee to provide a receipt. This needs to be based on average costs and be a reasonable amount. Add the amount of tax-free allowance to your employee's net salary or wages (after PAYE) when you pay them. Show the total tax-free allowance paid in your wage book. Do not show the tax-free amount on your employment information schedule.
Alternatively, if you are regularly reimbursing the employee for a particular cost, you could pay them a regular allowance instead.
KiwiSaver employee deductions are calculated on the excess amount at the employee's normal rate according to the agreement between the employer and the employee.