Inland Revenue is being accused of making a policy U-turn
that runs the risk of undermining the integrity of the tax
system, eroding voluntary compliance and reducing business
confidence in the tax department.
One of the issues being highlighted by tax practitioners is
workers who have relocated to Christchurch at their
employers' expense risking having their accommodation costs
treated as income under a new tax ruling.
Polson Higgs tax partner Michael Turner said the long-held
view of most taxpayers, and Inland Revenue, was that the
provision of an accommodation benefit was not taxable to an
employee where the employee maintained a home elsewhere.
That was on the basis there was no net benefit to the
employee with them incurring all the costs of home ownership.
''Therefore, the provision of the accommodation by the
employer in a different location did not leave the employee
The previous approach was reflected in the historical
legislation and the old IRD pronouncements, he said. It was
therefore ''stunning'' that the department could issue a
statement and suggest taxpayers who had treated such payments
as tax-free should make a voluntary disclosure to the
department and pay PAYE for the past two years, Mr Turner
''My prediction is there will be political fallout from this
announcement with the Government forced, because of the
public outcry, to legislate so the department can't follow
through on its statement,'' he said.
Deloitte Dunedin tax partner Peter Truman said that sometimes
in tax, each side did not see the other and it seemed this
was one of those situations.
''For what is really a nothing issue from a revenue
perspective, Inland Revenue's approach will be seen as
disappointing and unreasonable by the tax community."
From a revenue perspective, the amounts involved were trivial
in aggregate but could add up to a reasonable amount for a
Most employees did not see travelling away from home at the
employer's request as a benefit, particularly where the
travel was not short-term, he said.
To tax the value of accommodation provided in those instances
effectively represented an additional cost to employers but
did not sit comfortably on policy grounds.
There were situations where the provision of accommodation
did represent a real benefit which should be taxed, generally
where employees saved money because of employer-provided
accommodation. That could include farm worker accommodation
or employer-provided houses at remote locations.
''There are likely to be only a limited number of taxpayers
who have received long-term accommodation and have been
relying on the historic position that [this] is non-taxable.
For those affected, the position is disappointing and will be
seen as an about-turn,'' Mr Truman said.