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Changes to Clarify when Accommodation and Employee Allowances are Non-taxable

Published 01 Jul 2014

Changes to clarify when accommodation and employee allowances are non-taxable

The Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 enacted late June 2014 has introduced a number of changes to the tax treatment of Employee allowances. These changes clarify the tax treatment of Employer-provided accommodation, accommodation allowances and other payments provided to Employees as reimbursement for expenses.

Key features

The following key features are subject to certain conditions:

  • Accommodation and accommodation payments provided to Employees on out-of-town secondments of up to two years or while on out-of-town capital projects of up to three years, are exempt from tax. These time periods are extended under specific transitional rules for people working on Canterbury earthquake recovery projects.
  • Accommodation and accommodation payments provided to Employees who are required to work regularly in more than one location are exempt from tax.
  • Accommodation and meals when employees attend a conference or training course are exempt from tax.

When accommodation is taxable, it is generally taxable on its market rental value.

Other features include meal costs linked to work related travel, which will not be taxed for up to three months, and distinctive clothing (such as uniforms) used for work purposes now being tax exempt in specific circumstances.

When do the new rules come into effect?

Most of the new rules will take effect from 1 April 2015. However, Employers may have the option to apply some of the new rules from 1 January 2011 provided they meet certain criteria.

Source: IRD