IRD may tax lodging allowances

19:13, Dec 06 2012

Inland Revenue is proposing to tax accommodation allowances in what accounting firms call an "unwarranted" and retrospective change.

The proposal, announced in a statement yesterday, would mean where an employer provides accommodation or an accommodation allowance, the amount is taxable and the employer must deduct PAYE tax.

This would include situations where workers have accommodation provided by their employer while temporarily relocated or travelling for work.

KPMG said the statement was "contrary to long-standing practice", where it was considered there was no benefit from such an allowance and no tax payable, if a worker had a home elsewhere.

The change implied anything more than a few days would be taxable in future.

The IRD "seems to be trying to rewrite history", KPMG said. "We are not convinced IRD has this right from either a technical or policy point of view." A retrospective change was not justified nor in line with good tax policy.


Taxpayers who make voluntary disclosures would only be required to account for PAYE for the past two years.

Accommodation may not be taxable when it was just overnight or for a short-term stay by a worker when they have to be away from home for work.

Deloitte chief executive Thomas Pippos said the IRD approach would be seen as "disappointing and unreasonable" by the tax community.

"The reality is that from a revenue perspective the amounts involved are trivial in aggregate, but can add up to a reasonable amount on a case by case basis."

The Dominion Post