Phone top-up cards are a way for organizations to provide their employees with mobile phone credit or data access.
Provision of top-up cards to employees have become a source of debate for many organizations in recent years, causing tax issues with authorities. The key distinction lies in how they are treated:
- Allowance: If the organization pays its employees an allowance meant to cover the cost of phones, it becomes taxable income to the employee (According to Tax Guide 5). The organization must add the amount to the employee’s salary and withhold tax accordingly.
- Job-related expense: If the organization can prove, with documentation, that it purchased the top-up cards directly and then provided the top-up cards to employees, and that the use of the phone credit is necessary for the employee’s job (e.g., salesperson needs to call clients), then the provision of top-up cards is not subject to tax withholding.
In short, the tax treatment depends on how the phone credit was given to employees (cash allowance vs. provision of top-up cards) and whether the provision of phone credit is a work-related expense.