Relocation payment, overtime meal allowance tax changes
An issues paper released today seeks feedback on the details of the government's proposed legislative changes to ensure that employer payments for employee relocation expenses and overtime meal allowances are not taxable to the employees who receive them.
The paper outlines the possible requirements that would have to be met for these payments to be exempt from income tax and fringe benefit tax, seeking comment on the workability and effectiveness of the criteria.
"The proposed changes, announced on 24 October, are intended to remove the uncertainty about whether payments for relocation expenses and overtime meal allowances are taxable to the recipients," Finance Minister Michael Cullen and Revenue Minister Peter Dunne said today.
"The uncertainty has grown over the years, and the time has come to clarify and simplify the legislation, to save time and money for everyone involved – employers, the tax administration and the government alike.
"As announced earlier, it will obviously be necessary to introduce clear limitations to the tax-free status of these payments, to prevent their being used as a non-tax salary substitute.
"For relocation expenses, the issues paper looks at what constitutes relocation, as opposed, say, to employees merely moving closer to their existing workplace, and what expenses should qualify as relocation expenses, of which a comprehensive list is provided.
"For overtime meal allowances, the issues paper suggests a number of limitations for them to be tax-free – such as requiring the employee’s contract to specify that he or she is eligible for a meal allowance when working overtime, and distinguishing in law between 'overtime' and other occasions for which meal allowances may be paid.
"We encourage all interested parties to express their views on the suggestions made in the issues paper, so that the ensuing legislation does what it is intended to do and operates as effectively as possible," they said.
The issues paper, "Tax-free relocation payments and overtime meal allowances", is available at www.taxpolicy.ird.govt.nz. The closing date for submissions is 14 December 2007.
Rachel Baxter, Revenue advisor to Mr Dunne, 04 471 9728
Bryan McDaniel, Press secretary to Dr Cullen, 04 471 9412