The NZ Herald featured an article, on Thursday the 21st of May 2020, which suggested that any employee working from home can ask their employer to approach the Inland Revenue Department for a tax refund of $15 per week.
This article is largely confusing and misleading.
Inland Revenue Department put out a determination which set out certain circumstances where an additional allowance may be exempt from tax, if the employer was to pay an additional allowance to an employee to cover the costs of working from home during the COVID 19 pandemic.
The tax exemption only applies to an additional allowance. There is no refund or credit available to the employees.
The amount that can be paid as an exempt income to the employee for expenditure incurred by the employee depends on various factors such as:
There has to be a connection between the expenditure and performance of employee’s job
The expenditure cannot be of private or capital nature.
As there are many factors to consider the Inland Revenue Department has put out a temporary determination to simplify this during the COVID 19 pandemic.
The determination EE002 states that in cases where the employer is paying the employee who works from home due to the COVID 19 pandemic an allowance, up to $15 p/week, or $30 p/ fortnight or $65 p/month of that allowance can be treated as an exempt income to the employee.
This amount is in recognition of expenses such as increased heating cost etc. that the employee will incur whilst working from home.
If an employee asks you about their entitlement to a tax refund amounting to $15 p/week, please advise them that this is not correct as there is no tax refund or credit available to them.
If you have any questions, please do not hesitate to ask us.