ANSWER ID:9280

If you need to reimburse an employee for a business expense, you can include the reimbursement in the employee's pay. The tasks below explain how to set this up and process the pay, as well as how to record the purchase.

Note: Please seek the advice of your accounting advisor to determine how employee reimbursements should be handled when preparing your payment summaries.

Here's what we'll cover in this support note:

1. Setup a clearing account for reimbursements

2. Set up a payroll category for reimbursements

3. Exempt the reimbursement from superannuation calculations

4. Reimbursing an employee

Task 1 - Setup a clearing account for reimbursements

1. Go to the Accounts command centre and click Accounts List.
2. Click the Liability tab.
3. Click New. The Edit Accounts window is displayed.
4. In the Account Type field, select Credit Card.
5. Enter the new number for this account, then press Tab.
6. Give the account an appropriate name, such as Employee Reimbursements. The Edit Accounts window will look similar to the following example:
7. Click OK.

Task 2 - Set up a payroll category for reimbursements

1. Go to the Payroll command centre and click Payroll Categories.
2. Click the Wages tab.
3. Click New. The Wages Information window is displayed.
4. Give the category an appropriate name, such as Employee Reimbursement.
5. For the Type of Wages, select the Salary option.
6. Select the Override Employees' Wage Expense Account option and select the account created in Task 1. When you select this account, a warning message appears saying that the account for wages expenses is usually an expense account. Disregard this message. Refer to the example Wages Information window shown below:
   
7. Click Exempt. The Wages Exemption window is displayed.
8. Select PAYG Withholding as shown below.
   
9. Click OK.
10. Click Employee. The Linked Employees window appears.
11. Select the employee(s) who will be reimbursed.
12. Click OK to both the Linked Employees and Wages Information windows.

Task 3 - Exempt the reimbursement from superannuation calculations

1. Go to the Payroll command centre and click Payroll Categories.
2. Click the Superannuation tab.
3. Click the zoom arrow next to the Superannuation Guarantee category. The Superannuation Information window is displayed.
4. Click Exempt. The Superannuation Exemptions window is displayed.
5. Select the wages category created in Task 2, in our example this is Employee Reimbursement.
   
6. Click OK to both the Superannuation Exemptions and Superannuation Information windows.

Task 4 - Reimbursing an employee

Let's look at the following example:

Your employee, Peter Parker, spends $150 including GST on office supplies for your company. Peter provides you with a tax invoice for the purchase and needs to be reimbursed.

Providing the previous tasks in this support note have been completed, the reimbursement is processed as follows:

1. Enter the reimbursement through the employee paycheque against the Employee Reimbursement wage category.
2. Record a Spend Money transaction (via the Banking command centre). The purpose of this transaction is to:
   • Return the Employee Reimbursement Liability account to a zero balance by selecting this account in the Pay from Account field.
   • Allocate the expense to the appropriate expense account.
   • Allocate a GST tax code so that the GST paid is recognised.