Date posted: 18/02/2021

Latest NZ WFH tax break – good, but let’s get a permanent fix

Inland Revenue’s decision to extend working from home tax relief was great news for Kiwis bearing extra costs of running a home office, but “the Government needs to bite the bullet and come up with a fair permanent solution,” said John Cuthbertson, New Zealand Tax Leader for Chartered Accountants Australia and New Zealand (CA ANZ).

“Working from home has become the default setting for more and more Kiwis in the wake of COVID-19, imposing costs some can ill afford.

“CA ANZ supports a practical approach that is compliance-lite, fair for workers and provides certainty of tax treatment for employers who are in a position to cover additional work-related costs.

“It is important to recognise that for many employers hit hard by the COVID-19 pandemic, reimbursing work from home costs is not an option. It's money many don't have.”

IR’s move extends to 17 September 2021 an already temporary tax provision helping employers contribute to out-of-pocket expenses of employees working from home that ends on 17 March. Taking up the provision remains optional for the employer.

“Under the old pre-COVID rules, the tax system didn't really make it easy for employers to reimburse work from home costs, requiring them to correctly categorise payments to employees as either a tax-free reimbursement of business costs or a payment in the form of an additional benefit,” Cuthbertson said.

"It got complicated, discouraging employers from helping their employees out.

“Reviewing current work from home tax settings to ensure they’re fit for our new way of working clearly remains a work in progress.

“It is vital that a permanent response is ultimately found.”

Variation to Determination

This determination clarifies the tax treatment of reimbursement payments made by employers to employees who work from home.

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