September 2014 E Newsletter

Welcome

It’s officially Spring even if the weather forecast might suggest otherwise.  If you are looking for a distraction from things political as we move closer to the General Election look no further than this latest newsletter.   In this issue we take a look at changes to the tax treatment of employee allowances and to the basis upon which the Inland Revenue consider your payments to be made on time.

Changes clarifying when accommodation and employee allowances are non-taxable

The Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 enacted on 30 June 2014 has introduced a number of changes to the tax treatment of employee allowances. Most of the new rules will take effect from 1 April 2015. However, employers may have the option to apply some of the new rules from 1 January 2011 provided they meet certain criteria.

These changes clarify the tax treatment of:

• employer-provided accommodation
• accommodation allowances, and
• other payments provided to employees as reimbursement for expenses.

The following, provided certain conditions are met, are exempt from tax:

1. Accommodation and accommodation payments provided to employees on out-of-town:

1. secondments of up to two years, or
2. capital projects of up to three years.
   
   These time periods are extended under specific transitional rules for people working on Canterbury earthquake recovery projects.

2. Accommodation and accommodation payments provided to employees who are required to work regularly in more than one location.
    
3. Accommodation and meals when employees attend a conference or training course.
    
4. Meal costs linked to work-related travel will not be taxed for up to 3 months.
    
5. Distinctive clothing, such as uniforms, used for work purposes is tax-exempt in specific circumstances.

Reminder that IRD payment options are changing

As discussed in an earlier newsletter, from 1 October 2014, Inland Revenue will no longer accept cheque payments or returns at Westpac branches. Posted cheques must also now be received by Inland Revenue on or before the due date to avoid late payment penalties and interest. New Zealand Post recommends allowing 3–4 working days for delivery from cities and towns and 5–10 working days from rural areas.

Returns can be filed online using myIR Secure Online Services or posted to Inland Revenue.

Payments can still be made by cash or EFTPOS at Westpac branches, by internet banking, or by credit card on IRD’s website. Inland Revenue has outlined payment methods on their website . If you have any questions or issues with your payments, please do not hesitate to contact us.

2014 Mileage Rates

Inland Revenue have announced that the motor vehicle mileage rate for 2014 will remain at 77 cents a kilometre for both petrol and diesel fuel vehicles.

You can use this rate for up to a maximum of 5,000 km of work-related travel per year. For distances greater than 5,000 km, you must keep a record of actual vehicle expenses.  Under the mileage rate method, you are required to keep details of the business use of the motor vehicle and calculate the mileage travelled for business purposes for the income year.

The mileage rate can also be used as a reasonable estimate of the costs incurred by an employee when reimbursing them for business use of their private vehicles.

Taxpayers are not obliged to use the Commissioner’s mileage rate. They can still use actual costs if they consider that the Commissioner’s mileage rate does not reflect their true costs. This will often require keeping a logbook for a test period of at least 90 consecutive days to estimate the proportion of business use of the vehicle.