Employee phones and PAYE / FBT

Inland Revenue recently released Determination EE00 “Employee use of telecommunications tools and usage plans in their employment” to simplify the PAYE / FBT rules for employee mobile phones.
 
The determination applies to three situations: Class A (principally business use of the phone), Class B (principally private use of the phone), and the De Minimis Class (a reimbursement payment of no more than $5 per week, per employee).
 
Where there is principally business use of the phone, if the employer reimburses the employee 75 percent of their total phone bill, the whole reimbursement is exempt income. Alternatively, if they pay 100 percent of the bill, then 75 percent can be treated as exempt income of the employee.
 
For principally private use, if the employer reimburses 25 percent of the total bill, then the whole amount reimbursed is exempt. Alternatively, if they pay 100% of the bill, then 25 percent can be treated as exempt income, with 75% taxable.
 
The De Minims permits a payment of up to $5 per week, amounting to no more than $265 per year, per employee, to be treated as exempt income.
 
The devil is in the detail and there are conditions that must be met before the above rules can be used, but it should provide employers with an easy rule of thumb to adopt. We’re here to help.