Overview

Clauses 34, 35, 42, 485, 545, 547 to 549, 616, 617 and 619

The amendments to the Income Tax Acts 1994, 2004 and 2007 ensure that payments by employers when relocating their employees, and providing them with overtime meal allowances are exempt from income tax and fringe benefit tax if certain criteria are met. The changes were signalled in an officials’ issues paper, Tax-free relocation payments and overtime meal allowances, released in November 2007, and are designed to remove uncertainty about whether and when these payments are tax-free to employees that receive them.

To further reduce uncertainty, the changes apply to payments made over the past four years, as well as to future payments. By statute, Inland Revenue is generally unable to re-assess an income tax liability beyond four years.

Ten submissions were made on this part of the bill and were generally supportive of ensuring that the two allowances were non-taxable.

Five submissions expressed concern, however, that specifically making two allowances non-taxable would imply that all other allowances would be taxable. They suggest Inland Revenue undertakes a general review of the tax treatment of all allowances before any legislative changes are contemplated. This is a misunderstanding, as the bill does not remove the more general provision that determines whether allowances are tax-free or taxable. All it does is carve out two allowances to ensure that they are non-taxable when the general provision might otherwise suggest that they were taxable.