Reimbursements or reimbursing allowances in relation to employee use of telecommunications tools and usage plans in their employment are taxable and subject to PAYE unless specifically exempt.
Section CW 17 of the Income Tax Act 2007 allows reimbursements or reimbursing allowances to be exempt to the extent that an employee would be allowed a deduction if they incurred the expenditure and the employment limitation did not exist. Evidence is required to demonstrate a ‘nexus’ between incurring the expenditure and deriving income.
Under s CW 17(2) a reimbursement may be exempt or under s CW 17(3) a reasonable estimate of the amount of expenditure may be exempt. In this context a reasonable estimate is one that has some objective basis. For example, the estimate might be based on actual historical data or employee survey information. Employers must retain sufficient information about how the estimate was determined to substantiate the amount.
This Determination provides employers with the option of applying certain percentages to make an allocation between business use and private use for usage plans related to telecommunications tools based on the level of business use. There is also a de minimis level of payment that may be treated as exempt income.
Inland Revenue has released an Operational Statement to resolve uncertainty whether employer-provided travel from home to a distant workplace is subject to income tax (as PAYE or fringe benefit tax (FBT)). It states that employer-provided travel from home to a distant workplace will be taxable (and subject to FBT or income tax) unless one of the following applies:
• the travel is one-off or very occasional (de minimis applies)
• the travel relates to a temporary posting or secondment (up to two years)
• the employee also genuinely works at a hometown workplace, or
• the employee works from home on specified days (home being their place of work on those days, and the travel relates to one of those days).
Taxpayers are expected to apply this Statement to travel taken from 1 April 2020 (or before if they wish to). In case of any inconsistency between this Statement and the Interpretation Statement IS3448 Travel by Motor Vehicle between Home and Work: Deductibility of expenditure and FBT implications, the approach by this Statement will be followed.
The option to use this Determination will reduce business compliance costs, so for more information on accounting firms Auckland, chartered accountants Auckland and tax accountants please go to https://www.greenlion.co.nz