Taxman eases rules for home-office expenses

Inland Revenue is making it easier for employers to reimburse the expenses of employees who are working from home because of the coronavirus pandemic.

A new determination from the tax department means employers can pay employees up to $20 a week tax-free for expenses such as additional heating costs, without having to estimate or show what the employee’s actual expenses were.

Employers can also now make a tax-free payment of up to $400 per employee for furniture costs, also without having to gather evidence on how the money is spent.

The rules are a ‘‘temporary response’’ to the Covid-19 pandemic and would only apply to payments for expenses incurred between March 17 and September 17, it said.

Employers have previously only been allowed to make a taxfree payment of $5 a week to employees for phone expenses before needing evidence that expenses had been incurred as a result of working from home.

Inland Revenue said its ruling was not intended to suggest that employers should feel obliged to make such payments to staff who were working from home.

‘‘It is ... acknowledged that many employers will not be in a financial position to make additional payments to employees during the Covid-19 pandemic,’’ Inland Revenue tax counsel leader Susan Price said in the determination.

Chartered Accountants Australia and New Zealand welcomed the ruling, which it said would help employers contribute to the out-of-pocket expenses of employees working from home.

But the industry body’s New Zealand tax leader, John Cuthbertson, said the ruling was only a temporary solution ‘‘to what is a long-term issue that the country needs to address’’.

‘‘Working from home will become the default setting for more and more Kiwis in the wake of Covid-19 and the tax system needs to recognise that workers are bearing extra costs,’’ he said.

Prior to the new determination, reimbursement rules had become complicated, he said.

‘‘The tax system didn’t really make it easy for employers to do this, 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 Inland Revenue was right to recognise that reimbursing such costs might not be an option for hit-hard firms. ‘‘It’s money they don’t have.’’