A cellphone allowance is a set amount paid to an employee toward the cost of a mobile phone and its usage. Whether it is taxed depends on whether it is a flat allowance or a reimbursement of actual business use.
What it means
A fixed monthly cellphone allowance is generally taxable in full, because it is paid regardless of actual business spend. Where instead the employer reimburses the business portion of an itemised bill, or the phone is used mainly for work, a different treatment can apply. The default for a flat allowance is to tax it as remuneration.
Where it fits in
A cellphone allowance is an earnings component, taxable like a general allowance when it is a flat amount. It sits alongside other tool-of-trade type allowances and is reported under the relevant IRP5 source code.
Key rules
- A fixed amount toward phone and usage costs.
- Generally taxable in full when paid as a flat allowance.
- Different treatment may apply to reimbursement of proven business use.
- Reported under the prescribed IRP5 source code.
