MHK Chartered Accountants Clarify New Tax Rules

As the new financial year dawns, Ian Malcolm, Managing Director of MHK Chartered Accountants advises that the Inland Revenue Department has introduced new rules, effective from 1 April 2015, to clarify the tax treatment of accommodation and meals provided to employees. The rules also cover allowances paid to reimburse employees for accommodation and meal expenses, and the good news is that some employers can backdate the new rules to 1 January 2011 for accommodation and 1 April 2011 for meals, if they meet certain conditions.

As Ian states, “Our team broadly agree these rules are fair, and applaud the IRD for their favourable retrospective backdating of this, and the clarification of the deductibility / assessability of these items.  There is of course a pay-off, there is the need for more stringent recording and retention of records on Employees, however overall this is a positive step”

Accommodation and accommodation payments are tax-exempt for employees on out-of-town secondments for up to two years; on capital projects for up to three years; who work at multiple workplaces on an ongoing basis and who attend meetings, training courses or conferences as part of their job.

There are specific rules that apply to people working on Canterbury earthquake recovery projects; New Zealand Defence Force personnel; ministers of religion and people working overseas.

Meals and meal allowances are tax exempt for employees on work-related travel for up to three months and who attend meetings, training courses or conferences as part of their job.

Employers must ensure they tax their employees’ accommodation or meals correctly or the employee will be liable for additional tax either by PAYE or FBT.  Receiving accommodation or meals can also affect their employees’ Working for Families Tax Credits entitlements, child support payments and student loan obligations. 

The IRD has an online decision tool available on their website at www.ird.govt.nz  going live from 1 April 2015 to help employers work out whether the accommodation or meals they provide are taxable. They can also call MHK Chartered Accountants at 09 3798011 and they’ll work through specific situations with employers to help them legally minimise both their and their employees’ tax liability.

MHK Chartered Accountants specialise in legally minimising all types of taxation obligations and offer a no-obligation exploratory discussion free of charge.  For more information on MHK Chartered Accountants please go to http://aucklandaccountant.net.nz .