In an effort to reduce uncertainty regarding the tax treatment of employee reimbursements and payments for meals, accommodation, communication and clothing, the IRD released an officials’ issues paper in November 2012. The IRD is seeking feedback on proposals to introduce legislation specifically pertaining to these types of expenditure.


  • Employee meal costs when travelling for work – tax-free if duration of travel to a given location is less than three months, otherwise taxable in full for longer trips,
  • Meal expenses (not during travel for work) – tax-free provided payments are not made on a regular basis or as a reward for employee services.


  • Cost of employee accommodation when travelling for work – tax-free if duration of work travel to a particular work location is less than 12 months, with a discretion for travel in excess of 12 months in exceptional circumstances – taxable in full for longer trips,
  • Cost of accommodation provided as part of employment, e.g. farmhouse – No change – the market value of accommodation to be treated as taxable,
  • Employees who work from home – No change – market value of accommodation is taxable,
  • Cost of accommodation (more than one permanent workplace) – Factual assessment of the principal place of work to be performed i.e. based on time spent. Accommodation payments for the second workplace may be tax-exempt,
  • Cost of accommodation (employees seconded overseas) – Treat as taxable up to the market value of equivalent accommodation in NZ, e.g. a similar property with the same number of bedrooms.



  • Payment for employee’s communication costs (including telephone and internet) – Taxable in full except where the private/work portion is able to be separately identified.



  • Cost of clothing for employees – Taxable unless the clothing is necessary and peculiar to the employee’s occupation e.g. uniforms, protective or specialist clothing.

On a related topic, in December 2012 the IRD released a statement (CS 12/01) that has caused some concern. The statement outlines the IRD’s view on accommodation allowances and accommodation provided to an employee on secondment when that employee continues to maintain a home in their original location. In this situation it is accepted practice for such expenditure to be treated as non-taxable to
the employee. This treatment and its approval by the IRD dates back to the now expired (in 1998) Technical Rulings Manual, which included the following statement: Exemption – Cases will arise where an employee is required to live away from his/her normal place of residence. He/she is required to maintain the normal place of residence for the family while working away from home. In these cases, there will be no benefit in respect of the accommodation supplied by the employer as the cost of maintaining the family home will offset any benefit received. The value of the accommodation supplied will not be taxed.

In contradiction to its own historical commentary, the IRD have now advised:

  • Where an employer provides accommodation or an accommodation allowance, the amount is taxable and subject to PAYE,
  • When accommodation payments have been made by the employer for expenditure incurred by the employee the amount is taxable and subject to PAYE,
  • Accommodation for overnight and short-term stays by an employee in another location is not taxable.

The statement has been poorly received as the IRD’s view is arguable, however due to the lack of technical analysis provided, it is difficult to confirm how the IRD has reached its view. The IRD have advised that taxpayers should make a voluntary disclosure if they have not treated amounts correctly. For this purpose the statement should be referred to as the period of reassessment, and application of interest and penalties will vary depending on the facts.