Expense Reimbursement Policy
An expense policy defines what the company will pay for, how employees get reimbursed, and what documentation is required — preventing disputes and ensuring tax compliance.
What is a Expense Reimbursement Policy?
An Expense Reimbursement Policy creates a shared understanding between employer and employee about what business expenses the company will cover, how to seek approval before incurring an expense, and how to submit and process a claim. Without a clear policy, disputes arise about what was agreed and what the company considers a legitimate business expense.
From a tax perspective, a documented expense policy is important for substantiating deductions. The ATO requires businesses to retain records of business expenses, and a policy that requires receipts and describes the business purpose of categories helps establish that deductions are legitimate.
When do you need a Expense Reimbursement Policy?
- ✓When employees begin travelling for business or entertaining clients
- ✓When scaling the team and needing consistent financial controls
- ✓When reviewing finance processes as part of a policy refresh
- ✓Before engaging contractors or remote employees who incur business expenses
Key provisions to include
Covered Expense Categories
Travel, accommodation, client entertainment, professional development, and others specifically approved.
Approval Process
Pre-approval requirements based on expense amount and category.
Receipt Requirements
What documentation must be submitted with each claim.
Submission Timeline
How quickly employees must submit claims after incurring an expense.
Reimbursement Timing
When the employee can expect to be reimbursed.
Non-Reimbursable Items
Clear list of expenses that will not be covered under any circumstances.
Common mistakes to avoid
Not specifying a GST tax invoice threshold ($82.50 is the ATO threshold requiring a valid tax invoice)
Allowing unlimited entertainment expenses without a per-head cap
Not requiring pre-approval for large expenses, leading to unauthorised spending
Reimbursing without receipts and then facing ATO scrutiny during an audit
Frequently asked questions
What receipts do I need to keep for business expenses in Australia?
The ATO requires a tax invoice (not just a receipt) for any business purchase over $82.50 including GST. For amounts under $82.50, a simple receipt is sufficient. All records should be retained for at least 5 years. Your expense policy should require employees to submit original receipts or clear digital copies within a specified timeframe.
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