Tax relief on accommodation allowance

Employers providing accommodation allowance to employees who are relocated on a temporary basis may be able avail tax deductions.

Graham Tubb, Group Tax Counsel at Inland Revenue Department (IRD) said that it was not unusual for people to work away from home for a short period and for their employer to provide or pay for their accommodation.

“Generally, accommodation payments made by an employer, or the value of accommodation provided by an employer are taxable. However, when an employee temporarily shifts to a new location for work, the payments or the value of the accommodation provided is not taxable,” he said in a statement.

It is understood that IRD had received a number of queries relating to a Statement issued by Naomi Ferguson, Commissioner and Chief Executive on December 6, 2012.

The queries were about the way in which the Department treated employer-provided accommodation allowances when a person had relocated on a temporary basis.

Mr Tubb said that this approach will not apply if the person has relocated to take up a new job with a new employer.

“There are a number of factors that the Commissioner will consider in determining the tax treatment of accommodation and whether a person has made a temporary shift. This includes whether they have retained their substantive employment position in the original location or have relocated to take up new employment for the duration of the transfer. The Commissioner will also consider if their original location has remained the centre of their domestic life,” he said.

Mr Tubb said that IRD was working to clarify how these rules may apply to different situations, as they will vary from case-to-case.

“Clearly, overnight hotel accommodation will not be taxable. IRD is generally satisfied that when an employee in the course of their job shifts to a new location for less than six months, this is likely to be temporary in nature. Therefore the payments or the value of the accommodation provided will not be taxable,” he said.

Employers who are uncertain about particular accommodation arrangements should consult a professional adviser or contact IRD, he added.

Indian Newslink has sought the opinion of tax expert Vijay Talekar, an Auckland based tax expert. We hope to carry his explanation in our next issue.

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