There is a new way for determining the extent to which accommodation expenses, meals etc can be claimed as tax deductible due to the recent Tax Bill.
Employee accommodation and related
Sets time boundaries around expenditure on accommodation etc paid for employees rather than base claims on facts like whether the employee has a house to maintain. (Special rules apply for Canterbury)
There are three tests:
- How long is the project expected to take?
- How long is the employee away from home?
- Could the employee be reasonably expected to get home for the night?
Two year time limit – short term job
The job is expected to take less than 2 years. You can claim employee costs for up to two years.
Three year time limit – long term project
The example provided is building a dam. The project is expected to take more than 2 years so you can claim expenses on employee accommodation etc for up 3 years.
If circumstances change
If, for example, the employee decides to buy a house in the area where he/she works, the allowances cease to be tax deductible. There are also anti avoidance rules. You can’t make the costs part of a salary package.
Multiple workplace rule
The example given is an employee who manages offices in Christchurch and Dunedin (home town). Costs relating to being in Christchurch are deductible without a time limit.
Conferences and training
Sometimes the employees could get home at night. However, if they are required to stay for team building or similar reasons, the costs are fully tax deductible.
What if costs become taxable?
The general rule is market value. However, this can be unrealistic if it is an overseas posting. In this case apply market value in the area the employee lives.
Meals and light refreshments
Three months maximum when employee is away from home. Reimbursements and allowances allowed. The rules also cover conferences, when the employee is not away from home.
Timing and details
Most of the proposed amendments will apply from 1 April 2015. However, there will be a choice of applying the revised accommodation rules to accommodation arrangements put in place on or after 1 January 2011, subject to meeting certain conditions.
-Thanks to Jamie Tulloch’s Business and tax tips