Loading
Badaa(Newbie)Newbie
21 Nov 2025

Hi, I have a question about work-related deductions and whether an employee is considered to have “incurred” an expense.

Could you please clarify if the employee can claim a deduction in the following situations involving work tools?


Scenario 1

• Employee buys the tool

• Employer reimburses the full amount

• Employee then repays the employer through post-tax payroll deductions

Can the employee claim the cost as a deduction, or is this treated as a reimbursement so deductions are not allowed?


Scenario 2

• Employer buys the tool and claims the GST credit

• Employee repays the employer the net (ex-GST) cost

Can the employee claim any deduction in this situation?


Scenario 3

• Employer buys the tool but does NOT claim the GST

• Employee repays the employer the full GST-inclusive amount

Does the employee incur the expense for deduction purposes in this scenario, or is it still treated as employer-paid?


I’m not giving tax advice — just wanting to understand the correct ATO treatment for payroll processing.

Thank you in advance.

165 views
2 replies
165 views
2 replies

All replies

NikkiATO(Community Moderator)Community Moderator
24 Nov 2025

Hi @Badaa,


In all 3 scenarios you've described, the employee can't claim a deduction for the work tools. This is because the employee hasn't truly 'incurred' the expense under tax law.


To claim a work-related deduction, you must have incurred an expense. You incur an expense when you either:

  • receive a bill or invoice for an expense that you're liable for (even if you pay it after 30 June)
  • don't receive a bill or invoice but you pay for the expense.

In your scenarios, the employer is the one who initially purchases the tool or receives reimbursement for it. The employee's subsequent repayment to the employer through payroll deductions or direct payment doesn't change the fact that the employee didn't incur the original expense.


This treatment applies regardless of whether the employer claims GST credits or whether the repayment includes or excludes GST. The key issue is who incurred the expense in the first place.


Bottom line: 'incurred' means the employee must have had the legal obligation to pay when the expense arose. If the employer paid or reimbursed, the employee doesn’t meet that test.

Liked by Badaa

Featured articles

Finding your TFN

6 Feb 2026 · 4 min read time

Linking your myGov account to the ATO

24 Aug 2025 · 3 min read time

Spouse details and your tax return

15 Apr 2026 · 3 min read time

Top liked users

  1. Bruce4Tax

    (Taxicorn)

    3265 likes

  2. Taxduck

    (Taxicorn)

    2071 likes

  3. PayrollDeanne

    (Taxicorn)

    818 likes

  4. YellowPotato

    (Taxicorn)

    529 likes

  5. knaresbro

    (Devotee)

    364 likes

Top contributors

  1. Bruce4Tax

    (Taxicorn)

    10404contributions

  2. Taxduck

    (Taxicorn)

    4763contributions

  3. PayrollDeanne

    (Taxicorn)

    2064contributions

  4. YellowPotato

    (Taxicorn)

    1353contributions

  5. YEP

    (Devotee)

    837contributions

Loading
Employee reimburses employer for work tools — deductible or not? | ATO Community