Compliance Cost Reduction Determination for Telecommunication Tools
IR has issued a draft Determination, ED0219, which considers the issue of an employees’ use of telecommunications tools and usage plans in their employment, and applies to scenarios where the employee is directly incurring the costs themselves (providing their own telecommunication tool and/or usage plan), and their employer then agrees to pay them a reimbursement in relation to the business use element of those costs.
The Determination is split into three parts:
- A Class A scenario where the telecommunication tools and/or usage plan are principally used by the employee in their employment; and they are also used privately;
- A Class B scenario where the telecommunication tools and/or usage plan where the employee is required to use telecommunications tools and/or the usage plan in their employment based on a business reason, and they are also used privately; and,
- A De Minimis Class scenario, where the two previous Class arrangements are effectively ignored, with the employer reimbursement being exempt income of the employee if the amount paid is no more than $5 per week, amounting to no more than $265 per year.
Should the De Minimis Class not apply, then it is proposed under the Determination, that for:
- Class A scenarios – 75% of the amount paid can be treated as exempt income of the employee, unless the employer is only reimbursing or paying an allowance based on 75% of the total bill amount paid by the employee, in which case the total payment will be considered exempt income of the employee.
- Class B scenarios - 25% of the amount paid can be treated as exempt income of the employee, unless the employer is only reimbursing or paying an allowance based on 25% of the total bill amount paid by the employee, in which case the total payment will be considered exempt income of the employee.
The deadline for comment on ED0219 is 20th September 2019.
This 'A Week in Review' newsletter was originally published; Monday 19th August 2019. If you have any questions or would like a second opinion on any national or international tax issues, please contact me [email protected].
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